If your limited company cannot afford to repay its Bounce Back Loan (BBL), you could:

• Speak to the lender about your options to repay.
• Explore the government’s flexible repayment options.
• Contact a licensed insolvency practitioner for free, impartial advice.

Because BBLs didn’t require a personal guarantee from directors, the owed amount is classed as an unsecured debt and not a liability to the director.

What are the Bounce Back Loan repayment terms?

While the Bounce Back Loan Scheme didn’t require a personal guarantee from directors, after the first year, the company is responsible for repayment. Interest is added after the initial 12 months, and at a fixed rate of 2.5% for up to 10 years.

Speak to your lender

You should speak to your lender if your company needs help in repaying a Bounce Back Loan. Doing so can demonstrate a willingness to repay, and the lender may be more open to negotiating affordable repayments or amending the existing terms than if the company defaults on the loan.

What government support is in place to help with BBL repayments? Pay As You Grow (PAYG)

Pay As You Grow (PAYG) is a government support option allowing more flexible repayments for companies with a Bounce Back Loan.

Through PAYG, companies can:

• Extend their loan’s length from six years up to ten years at the same fixed rate.
• Make interest-only payments for six months, which they can do up to three times in the loan’s duration.
• Delay all payments for a further six months or eighteen months after the original loan was taken out.

All lenders are expected to offer their borrowers PAYG, and your lender should outline your policy’s specific repayment options.

Can a Bounce Back Loan be written off if my company can’t repay it?

A Bounce Back Loan is treated the same as any other unsecured debt and can’t be written off. However, if the company becomes insolvent and enters a formal insolvency procedure such as a liquidation or administration, it is included as part of those arrangements.

Can I dissolve or strike off my company with an outstanding BBL?

You can apply to dissolve a company with an unpaid Bounce Back Loan, or your company may face compulsory dissolution for non-filing of statutory information at Companies House. However, BBL lenders and the Department for Business & Trade are objecting to any form of dissolution.

How we can help a company that cannot afford to repay its BBL

If your Bounce Back Loan repayments become unaffordable, limited companies have several options to repay:

• Place the company into an affordable, formal repayment plan
  One of your options for repaying an outstanding Bounce Back Loan is through a Company Voluntary Arrangement (CVA). The IP will consider your company’s incomings and outgoings, calculate how much the company could afford to repay monthly and propose the arrangement to creditors. All of the company’s unsecured debt is included in a CVA, including an outstanding Bounce Back Loan. CVAs allow companies to continue trading and are designed for those with a viable business model but who can’t repay their debts.
  More on Company Voluntary Arrangements
• Formally wind-up an insolvent company
  If the company is insolvent to the point that recovery is unfeasible, you might be better off closing that insolvent company. Doing so draws a line under the unsecured debts and allows directors to start again or walk away. In this case, you can explore a Creditors Voluntary Liquidation (CVL), closing the company and writing off the unsecured debts. Entering a CVL sees the company formally wound up and closed, with the debts, including an unaffordable Bounce Back Loan, written off.
  More on Creditors Voluntary Liquidation

Can directors be held personally liable for a BBL?

Bounce Back Loans didn’t require personal guarantees. If the company enters an insolvency procedure, the debt is tied to the company and not the directors.

However, if the Bounce Back Loan has been misused, directors may become personally liable.

Have I misused a BBL?

Bounce Back Loans were intended to help businesses with working costs and compensate for reduced takings due to COVID-19.

Appropriate uses included:

• Paying staff, suppliers, loans and running costs (utilities/rent).
• Marketing costs.
• Investment into new production machinery and equipment.
• Maintaining business cash flow.
• Supporting directors’ income.

Inappropriate uses included:

• Paying dividends without a profitable balance sheet.
• Increasing employees’ salaries.
• Loans to directors or connected parties.

In summary

The Bounce Back Loan Scheme (BBLS) was for companies struggling with coronavirus-related debt. Classed as an unsecured debt, lenders did not require personal guarantees, with the debt belonging to the company. If an insolvent company with unsecured debts is formally wound-up and closed, those debts die with the company. If a company cannot afford to repay a BBL, there are several options available to make payments easier:

• Speak to your lender about amending the loan’s repayment terms.
• Explore the government’s flexible Pay As You Grow options.
• Enter a formal repayment plan such as a CVA.
• Wind-up the company in an orderly manner, drawing a line under the debts.

Free Consultation

Request a free confidential telephone consultation from 9am - 8pm, 7 days a week.

Schedule a Call

Back