If your company’s Bounce Back Loan has been used for personal gain or reasons not deemed to be in the company’s economic benefit, you could have misused the loan.

If you think you might have misused your company’s Bounce Back Loan, speak to us for free, impartial, confidential advice with no obligation.

Guidelines on Bounce Back Loan usage

The Bounce Back Loan Scheme was meant to help companies struggling during the COVID-19 pandemic, paying working costs and making up for reduced takings. Designed for ease of access, it allowed companies to quickly obtain to up to £50,000, with the loans being 100% government-backed. However, the loose rules and criteria surrounding the scheme meant it was open to abuse.

The loans could be used for the following purposes:

• Support the everyday running of the company.
  The Bounce Back Loan Scheme initially intended to pay staff, running costs, suppliers, repaying loans, supporting directors’ income, and maintaining the company’s cash flow.
• Investment to enhance the company.
  Outside of everyday costs, the Bounce Back Loan could be used to invest into the company. This could include marketing costs or purchasing new machinery and equipment.

What is Bounce Back Loan misuse?

The previous uses were primarily for a company’s economic benefit rather than personal use, and the following could be considered Bounce Back Loan misuse:

• Dividends
  You cannot use a Bounce Back Loan as dividends; these must be paid from company profits. Similarly, it should not be used to pay stakeholders.
• Increasing salaries
  A BBL can be used to pay salaries. It shouldn’t be used to increase them, however. Doing so might not be classed as an economic benefit to the company.
• Personal expenditure
  The loans should not have been used for buying luxury goods or holidays, paying deposits on personal property or non-business assets.
• Non-business-related investments
  Bounce Back Loans should not be used for non-business-related investment, especially in high-risk ventures.

What can I do if I’ve Misused My Company Bounce Back Loan (BBL)? Am I liable?

If, as director, you’ve misused the Bounce Back Loan in a way not to the company’s economic benefit, you should repay it. If the company can’t afford to maintain the BBL’s repayments, or it is struggling with other liabilities, the company may be insolvent, and you should seek advice from a licensed insolvency practitioner, such as Wilson Field, as soon as possible.

We can advise you on your company’s position, the effects of the BBL, and help you understand if you’re liable for the debt.

If your company is insolvent, you should seek advice from a licenced insolvency practitioner like ourselves. Speak to us for free, impartial, confidential advice with no obligation.

How can we help if your company can’t repay its Bounce Back Loan?

If you’re struggling to repay your company’s outstanding Bounce Back Loan, it could indicate the company has deeper-rooted financial problems. The severity and volume of the company’s debt will dictate which way would be most beneficial in helping it move forward.

1. Speak with our initial advisers via phone or online chat. If we can help, we can arrange a free consultation with a consultant and discuss your situation.
2. During the consultation, we will advise if an insolvency procedure is the most appropriate route forward or what alternative options are available.
3. After your consultation, if there is an appropriate route forward, we will issue the relevant documentation for you to formally engage us.

Depending on your circumstances, you may undergo one of the following options:

• Affordable, monthly repayment plan
  A Company Voluntary Arrangement (CVA) is a repayment plan designed to consolidate your company’s debts, including an unpaid Bounce Back Loan, into one affordable monthly repayment plan. It offers protection from creditors and allows the company to continue trading, free from creditor pressure while repaying the debts. The arrangement lasts up to five years, with the remaining unsecured debts written off upon conclusion.
  More on Company Voluntary Arrangements
• Liquidate the company
  If the company’s debts are of such a level that the company would be better off closing, you can close it through a voluntary liquidation process: Creditors Voluntary Liquidation (CVL). A CVL results in the closure of the insolvent company, drawing a line under its debts. Any remaining unsecured liabilities are written off, and the assets realised and distributed to the creditors. If liquidation is viable, the company ceases to exist, allowing the directors to walk away or start afresh.
  More on Creditors Voluntary Liquidation

In summary

Bounce Back Loans were intended to economically benefit struggling companies. If misused, a Bounce Back Loan can lead to directors being held personally liable for the outstanding amount. If your company is struggling to repay its Bounce Back Loan, or you’re worried you might have misused its funds, contact us in the strictest confidence, and our initial advisors will guide you through your options.

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