Bounce Back Loan Help

The Bounce Back Loan Scheme was launched in May 2020, following feedback from businesses that the Coronavirus Business Interruption Loan Scheme (CBILS) made it difficult for smaller businesses to access finance.

Bounce Back Loans provided small businesses with fast access to funds between £2,000 and £50,000 - capped at of 25% of their turnover. Businesses did not have to make any repayments for the first 12 months of their loan.

There were no detailed rules for how a Bounce Back Loan could be spent, but there were broad guidelines that it should be used for the ‘economic benefit’ of the business and should not be used for personal gain.

Common legitimate uses of the loan included paying company bills, purchasing stock or supplies, and paying staff wages.

The initial term of the loan was 6 years. The first 12 months were interest free (with no payments due), with interest rates of 2.5% per year applicable after.

Although the loans were 100% backed by the Government, it was made clear that businesses would be responsible for repaying any amount borrowed, plus any interest due.

The Bounce Back Loan is an unsecured debt. Unsecured debts in the liquidation process are generally written off, unless there are personal implications due to Bounce Back Loan fraud or misuse.

HMRC are undertaking checks into the use of Bounce Back Loans and other Covid support schemes, meaning they could investigate your company. It's best to get in touch with us to discuss any potential implications and options.

If you’ve received a Bounce Back Loan and close the company through the process of liquidation, part of a liquidator’s duty is to investigate and report on the Directors conduct.  This will include reviewing all the bank statements to understand if there is any illegal dividends / Directors loan / misuse of funds etc. They will also look into how the Bounce Back Loan funds were allocated - ensuring that any funds were used for the genuine economic benefit of your business, and not for personal gain. If you are found to have misused the funds from a Bounce Back Loan, there can be serious legal and financial consequences.

So, before you consider liquidation of your company, please speak to a member of our team. As we do all the analysis pre liquidation to ensure it’s the most appropriate route for you to take and assess any risk of unexpected personal implications.

As a sole trader, if you're struggling with Bounce Back Loan repayments, or unable to pay, it’s still unclear how banks are pursuing sole traders that default on their Bounce Back Loan.

In terms of the best way to approach things, a lot depends on your individual circumstances, and any other debts your business may have. You should speak to our team to assess your situation before considering formal routes such as Individual Voluntary Arrangements (IVAs) or bankruptcy.