I Can’t Repay My Bounce Back Loan – What Should I do?

Bounce Back Loan and CBILS overview

In response to the pandemic, one of the moves made by the government was to support cash flow for businesses by offering state-backed loans.

The Bounce Back Loan Scheme (BBLS) and the Coronavirus Business Interruption Loan Scheme (CBILS)  were introduced to help struggling businesses during this period stay afloat.

However, even after taking this loan, cash flow in some businesses took longer to improve than originally thought, or worse, did not get better at all leaving many businesses without any cash.

Your options if you can’t afford to repay the Bounce Back Loan

If you find yourself in a situation where it is likely that you will be unable to repay the Bounce Back Loan, there are a few things you could consider, these could include looking for additional funding, coming to an arrangement for repayment, or even closing the company down…

Your options if you want to keep your business open

If you want to save your business then you may be best to look for a professional assessment of what you are facing to come up with the best approach to fix the issues.

Funding or finance

For example you may be able to source and apply for alternative funding that will help your business recover long-term. The recently extended and government backed Recovery Loan Scheme may be a viable option.

Company voluntary arrangement

You may also want to find out if you are eligible for a company voluntary arrangement – licensed insolvency practitioners (IP) can negotiate with your lenders/creditors on your behalf for a formal restructuring of your company debts within a company voluntary arrangement.

Company rescue plan

In some cases a fast-track company rescue plan may be a better option. This is an informal solution similar to a Company Voluntary Arrangement. We can help you come to an agreement to repay your creditors over a set period in one manageable monthly payment.

Administration

If necessary you could appoint a licensed insolvency practitioners as an administrator. If you are eligible, company administration can protect you from legal action taken against you by your creditors while you (and the IP) come up with a suitable plan to turn your business around.

Your options if closing the company is the only way out

If you have explored the rescue and recovery options and there isn’t any likelihood of your business getting back on track then closing it may be the best way forward. There are two options depending on whether the business has any assets or funds.

Creditors voluntary liquidation

If there are assets or funds within the business, you could initiate a closure using a creditors voluntary liquidation, this makes sure you comply with all legal obligations as a director.

Also, you can see if you are eligible for director redundancy pay (which can be used towards the cost of a liquidation) and assist you in making claims where suitable.

Dissolution

If there are no funds or assets available to pay for a liquidation, and you can’t make a redundancy claim, then you may be able to use a process called administrative dissolution, this has the same result as a liquidation and makes sure all legal obligations are met but can work out to be far less costly.

Are you liable for paying back the Bounce Back Loan?

One of the questions we get asked most by our clients is ‘will they come for me’?

There is no personal guarantee for a CBILS or BBLS under £250,000, this means if you borrowed less than this you can’t be held personally liable for the loan unless there was some sort of wrong doing (misfeasance or fraud).

However, most lenders have requested personal guarantees from company directors of up to 100% of a loan if it is above the £250,000 (most likely a CBILS), exposing the directors of the company to serious personal financial risk if their business fails to comply with the payments at some point.

When a personal guarantee has been provided for a business loan, it means is that the lender expects you to pay back all, or an arranged amount, of the loan if your company cannot meet up.

To get their money back, they can take legal actions against you, which can put you, your home, and other assets at risk.

Also, there are situations where company directors are held personally responsible for the repayment of debt, even if they have not provided a personal guarantee. This can happen when:

• Preferential payments were made – if the loan was used to repay a lender/creditor in preference to others, or to repay an existing loan where a personal guarantee was provided.
• Cases of misfeasance – when company funds are mishandled deliberately.

Assistance from professionals when you can’t pay back your Bounce Back Loan

The rules surrounding insolvency, company loans, and personal guarantees can be difficult to understand and apply; this area is complex and can cause severe implications for company directors if not handled in the correct way.

We always advise people to ask for help as soon as possible (even if it’s not us); the more you wait, the more limited your options will be.

Struggling to pay back your Bounce Back Loan or CBILS? Get in touch today!

Our aim at Forbes Burton is to help you rescue your business. We have a team of experienced business rescue and recovery specialists that are dedicated to helping us achieve our aim.

You can reach us for some free advice (or call us free on 0800 975 0380) to get a quick assessment of your situation and also get the professional advice you need.

If you are finding it difficult to pay back your Bounce Back Loan or CBILS, please reach out to one of our team – our offices are located around the country.