Bounce Back Loan Help

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Bounce Back Loan Help for Limited Company Directors

If you're a Limited Company Director who has taken out a Bounce Back Loan, you may be wondering what happens if you can't repay it. Defaulting on your Bounce Back Loan can have serious consequences for you and your Ltd Company, but there are options available to help you manage your loan repayments and avoid any potential legal action.

At The Directors Helpline, we understand how difficult it can be to manage your business finances during these challenging times. That's why we offer tailored debt advice to help you navigate your Bounce Back Loan repayment and explore your options for managing your debt obligations. Here are some common questions we receive from business owners about Bounce Back Loans:

Frequently Asked Questions

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.

If you're struggling to make your Bounce Back Loan repayments due to financial difficulties, you may be eligible for a repayment holiday or extension. The Pay As You Grow (PAYG) Scheme is available to those who took our the Bounce Back Loan, allowing them to:

  • Extend the loan term from 6 years to 10 years at the same interest rate of 2.5%
  • Paying interest only for 6 months (available up to 3 times during the loan term)
  • Take a payment holiday for six months (available once during the loan term)

If you haven't yet used your PAYG options, we recommend contacting your bank to explore these possibilities. However, if you're unsure about how these options may impact your business or you have already exhausted your PAYG options, speak to our team today. We can provide guidance on alternative solutions that may better suit your circumstances.

I Can't Pay My Bounce Back Loan

As a Director of a Limited Company, if you can't pay your Bounce Back Loan, it's important to take advice as soon as possible. Ignoring the problem will only make it worse, so don’t wait until it’s too late.

Defaulting on your Bounce Back Loan can have serious consequences for you and your business. If you find yourself unable to repay, the lender (the bank) will likely start taking steps to recover the debt. This can include sending demands for payment, charging interest & late fees, and even petition to wind the company up, forcing it into Compulsory Liquidation. This is not recommended.

Get in touch today, we can help you navigate these challenging times and get your business back on track.

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Struggling to repay Bounce Back Loan

Can I write off my Bounce Back Loan?

When it comes to bounce back loans, the only circumstance in which the loan can be “written off” is if your business fails and enters a formal process such as Liquidation.

If you find yourself unable to repay the loan, the PAYG Scheme is available as an initial option before considering Liquidation. It is highly recommended to seek advice from an experienced team who can provide tailored guidance based on your specific circumstances.

We can assess all your potential options and provide valuable insights to help you effectively manage the repayment or liquidation process. We can also check if there would be any personal implications ahead of the Liquidation option. Get in touch today.

Can I Close My Business With a Bounce Back Loan?

Yes, you can close a Limited Company with a Bounce Back Loan through the process of Creditors Voluntary Liquidation.

However, it’s important to seek trusted guidance first, as closing a  Limited Company with a Bounce Back Loan could have serious consequences to you personally. The Bounce Back Loan debt belongs to the Limited Company, not the Director personally, but there are certain circumstances (such as misuse) where you, the Director, may still be liable for repaying the loan even if you close your Company.

At The Directors Helpline, we can provide you with tailored debt advice to help you navigate the complexities of closing your Company with a Bounce Back Loan. We can help you understand your options and how it would affect you personally in order to find a solution that works for you and your business.

Can I dissolve my company with an outstanding Bounce Back Loan?

In short, no. The bank is likely to object to the application for closing your company through dissolution/strike off.

The proper way to close it is through a formal Liquidation process, but it's important to understand the process, the role of the insolvency practitioner, and any personal implications before proceeding.

Contact The Directors Helpline to assess your situation and determine if Liquidation is the right course of action for you.

Frequently Asked Questions

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.

It’s important to understand the rules and restrictions of the loan. You should have only used the funds for legitimate business expenses such as paying wages, rent, and other overheads.

Keep accurate records and receipts of all loan expenditures to demonstrate that the funds were used for legitimate business purposes.

Misusing your Bounce Back Loan funds can have serious consequences to the Director. Bounce Back Loan misuse is still a grey area, but a few points which could be seen as misuse include:

  • Using the loan funds for personal expenses or other non-business purposes
  • Applying for more money than you should have
  • Should not have had the loan to begin with (dormant, never traded, set after the pandemic began etc.)

Watch our red, amber, green test on bounce back loan misuse and fraud for more information.

If you misused the loan, you may be in breach of your loan agreement, and could be subject to legal action and personal liability. Bounce Back Loan misuse is still a grey area, but as a Director who is thinking of closing or is struggling to repay, it’s important you understand what counts as misuse by speaking to a confidential helpline who can assess your individual circumstances.

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.

If you're a Sole Trader who is struggling to repay their Bounce Back Loan, you do not have the same level of personal protection as Limited Companies, and are personally liable for the Bounce Back Loan.

The first step is to speak to your lender (the bank) directly to discuss your options. They may be able to offer you a repayment plan, such as the PAYG options, that will make repayments more manageable for your business.

However, if you're still struggling, you need to seek guidance as soon as possible from The Directors Helpline – we can help you explore alternative options for your Bounce Back Loan.

"If your business is worried about Bounce Back Loan repayments, it's important to remember you are NOT alone and help is at hand..." Jonathan Cooper, Founder and Director
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About The Directors Helpline

We're a free, confidential and impartial service that helps you assess your options and any personal implications if your business is struggling to meet its financial obligations.

  • 20+ years of experience
  • Helped over 20,000 businesses
  • Rated excellent on Trustpilot

As an independent service who don’t operate as the Insolvency Practitioner, we look at all options, not just closing the company through liquidation. We help with business rescue, restructuring, and funding too.

Whatever the issue, contact The Directors Helpline today for free advice.

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