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Can’t Pay Bounce Back Loan? Consequences & Solutions

Millions of businesses and directors are at risk because they can’t repay Bounce Back Loans (BBLS) that were taken out at the height of the pandemic. Find out the consequences and options available today.

The UK government set up the Bounce Back Loan Scheme (BBLS) to provide short-term support to businesses during the Covid-19 pandemic. These loans of up to £50,000 were handed out by various lenders with little to no due diligence and given to many companies that otherwise would not have received finance. In the years that have followed, many companies have found themselves in a situation where they can’t pay bounce back loans that were taken out during the pandemic.

The result so far has been widespread arrears, defaults, and a massive amount of fraudulent activity. Many companies now face Liquidation because they can’t afford to pay back BBLS. As well as this, directors are having to deal with Insolvency Service investigations due to the bounce back loan fallout.

What Happens If You Can’t Pay Your Bounce Back Loan (BBL)

If You Took A BBL As A Limited Company

The loan is treated like any other business loan. After several missed bounce back loan repayments, the lender will likely start proceedings to recover their money. This could involve repossessing assets, legal action or, more likely, forcing the Liquidation of your Company. There is the option for a payment holiday. However, this may just be delaying the inevitable.

If You Took A BBL As A Sole Trader

If this was the case, you do not have the protection of a limited company. The BBL is the same as any other personal loan, meaning you are entirely liable for the outstanding amount.

If you fail to pay back your BBL, you will face similar action to personal loans. The lender will start legal action and, if you have any assets, will begin the process to make you Bankrupt. This risks your finances and assets, such as your home. If this happens, you need someone knowledgeable to fight your corner throughout the Bankruptcy process.

Will Bounce Back Loans Be Written Off?

Many directors are hoping that bounce back loans will be written off. However, there is no quick fix that will help businesses that can’t repay bounce back loans. The sole solution is for a company to undergo an insolvency process, such as Liquidation.

However, in the event of Liquidation, an investigation will be launched into how the bounce back loan was spent. If there is any evidence the BBL was not spent in the Company’s best interests, this can have far-reaching impacts on the directors involved.

Misspending And Fraud, The Consequences

Due to the ease of access to BBLS, many problems have arisen since the scheme closed. There are mainly two scenarios that could cause you legal trouble. These are:

1. You took the loan fraudulently

This mainly involves businesses overstating their revenue to get a larger loan than they were entitled to. If you are found to have done this, you could face legal action and be made liable for some or all of the loan.

2. You misspent the loan

These loans were intended to support the day-to-day running of your business and should have been spent in the Company’s best interest. Many directors who misspent their bounce back are now facing severe consequences.

If you used any of the money for personal expenses or transferred some to personal accounts, this may be an infringement of the original terms. This could include paying yourself, especially if the business becomes insolvent.

If your business enters insolvency due to being unable to repay bounce back loans, you will be under scrutiny as a director. The insolvency practitioner appointed to oversee the formal insolvency will investigate your financial records and your conduct. If rules are believed to have been broken, you can face further serious investigation from the insolvency service.

Leah O’Kane

Associate Director

10/10 Experience and Result

I would like to thank Rory and the team for an excellent service and a first class result, a result that was much better than expected. Having Bell and Company on board has lifted all the stress and let me…

10/10 Experience and Result

I would like to thank Rory and the team for an excellent service and a first class result, a result that was much better than expected. Having Bell and Company on board has lifted all the stress and let me move on with running my business. Couldn’t recommend highly enough.

Mr Graham – GB

Did You Misspend Your BBL Loan?

As mentioned above, these loans were intended for business expenses. Acceptable spending includes paying suppliers, wages, rent, utilities and refinancing other loans.

If you spent the money on anything other than business expenses or used it to pay yourself whilst the business was insolvent, you will be investigated in an insolvency situation. In some recent cases, directors of the companies that are still trading have even been surprised by investigations.

The outcome of this investigation could see you being found guilty of ‘misfeasance’, i.e. not fulfilling your duty as a director. This can lead to you being disqualified and barred from being a company director for up to 15 years. Most importantly, you can be made liable for some or all of the Company’s debts, even if there is no personal guarantee in place.

Establishing whether or not you have breached the rules can be difficult. As a result, it is essential to conduct a full financial review of your business and consult insolvency experts who can advise on your conduct. 

What to do if You Can’t Pay Your Bounce Back Loan

Although this may make it sound like you and your Company are consigned to face these consequences, plenty of options are available. Establishing what the personal impact could be for you is essential before making any decision.

Often, the best option may be to liquidate your Company or come to an arrangement that allows you to continue trading. By consulting an independent business debt specialist, you can ensure you don’t end up with any nasty surprises.

Bell & Company’s financial consultant team is always available to help and guide concerned directors. If you have taken a BBL or are worried about the viability of your business in the future, contact us today at 0330 127 6739 or fill in the form below.

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