Struggling with your Bounce Back Loan repayments? Wondering if Bounce Back Loan write off is an option?

Ordinarily directors cannot be held personally liable for bounceback loans that are not repaid by the company. However, if the company is placed into liquidation, the Liquidator has a legal duty to investigate what happened to the bounceback funds.  

If the Liquidator discovers that the bounceback loan funds have been used by the director for non-business purposes then the directors will have to personally repay these funds back to the Liquidator.

If you find yourself in a tough spot trying to manage your Bounce Back Loan repayments, you’re not alone. The Bounce Back Loan Scheme (BBLS) offered businesses the opportunity to borrow between £2,000 to £50,000, capped at 25% of their turnover The first 12 months were interest-free, but after that, repaying the loan in instalments with a 2.5% interest rate could be quite the challenge.

In this article, we’ll explore practical steps to take if your business is facing difficulty in repaying a Bounce Back Loan.

The Ins and Outs of Bounce Back Loan Arrangements

According to The Gazette, an estimated £45 billion in loans were disbursed through the BBLS, with a loan duration of around six years.

Several years after the onset of the COVID-19 pandemic, many businesses are still within their loan term, unless they paid off the loan early or underwent liquidation. In certain cases, businesses have extended their loan term to up to ten years.

Eligibility for a Bounce Back Loan included:

• Being based in the UK
• Being directly affected by the pandemic
• Being established prior to 1st March 2020

It became evident that a significant number of businesses not trading before the pandemic managed to secure a Bounce Back Loan, with some using the funds for personal purposes.

In response to these practices, the government introduced the Rating (Coronavirus) and Directors Disqualification (Dissolved Companies) Act 2021 in 2022. This legislation empowered the Insolvency Service to conduct retrospective investigations and take action, including director disqualification and ordering repayment from wrongful claimants. 

The Insolvency Act 1986 further provides the authority to scrutinise improper conduct of directors of liquidated companies and recover funds from them personally.

Struggling with your Bounce Back Loan repayments? Get assistance with Your Bounce Back Loan Repayment

If concerns about repaying your Bounce Back Loan are keeping you up at night, the first step is to reach out to your lender as soon as possible. They can provide guidance tailored to your unique BBLS circumstances, taking into consideration any other financial agreements you might have with them. Banks cannot write off a bounce back loan whilst your company is still active and trading.

One vital support option for managing your Bounce Back Loan repayments is the Pay As You Grow initiative, introduced by former Chancellor and current Prime Minister Rishi Sunak. The options under Pay As You Grow include:

• Extending the loan term from six years to ten, while maintaining the same fixed interest rate of 2.5%.
• Opting for a six-month repayment “holiday,” giving you a break from payments.
• Easing the financial burden by paying only the interest for six months, which you can do up to three times during your loan term.
• A customised combination of the above options.

It’s essential to note that in each scenario, the total owed amount may increase.

Dealing with Repayment Challenges

In the unfortunate event that your business is unable to meet Bounce Back Loan repayments due to cash-flow constraints, it’s time to call in a qualified Licensed Insolvency Practitioner. Two common paths in such situations are the Creditors’ Voluntary Liquidation (CVL) and the Company Voluntary Arrangement (CVA). But what sets these two apart?

For businesses capable of surviving and posting profits, a CVA – usually lasting up to five years – could be the remedy. By making agreed monthly contributions to the Insolvency Practitioner, and embracing changes to the business model designed to prevent future insolvency issues, your company might just save itself. Your company’s credit file and Companies House will bear a record of the CVA.

Alternatively, if the debts are insurmountable, a CVL might be the best course of action. The business will cease to trade, and a Liquidator will be appointed with the aim of maximising asset recoveries in order to make payments to creditors.

Summing Up: Your Bounce Back Loan Game Plan

Consider whether the Pay as You Grow initiative is right for you, be it extending the loan term, taking a repayment holiday, or temporarily paying only the interest for up to 6 months (up to three times).

If the business continues to struggle, a CVA could be your lifeline to continue trading if your business remains profitable despite financial challenges.

In contrast, a CVL might be the right strategy if the debts are unmanageable and you see no viable business going forward. The only way your bounceback loan will be written off is if the company is subject to an insolvency procedure such as liquidation.

If you’re struggling with your Bounce Back Loan repayments, the experts at Umbrella.UK Insolvency, Licensed Insolvency Practitioners, are here to help. Don’t hesitate to reach out for a complimentary 30-minute consultation. We’re dedicated to finding solutions for those businesses struggling to pay their bills on time.

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