The government introduced bounce back loans during the Coronavirus pandemic in order to support struggling businesses throughout such an unprecedented period. The scheme enabled businesses to take out loans of up to £50,000 without needing to provide a personal guarantee. No repayments had to be made within the first 12 months, however following this period many companies have found themselves struggling to meet their repayment schedule.
If this sounds like you and you’re in a position where you can’t pay a bounce back loan then you’re likely to be wondering where you stand and what to do next. At this point, it’s essential to consider whether or not your company is insolvent. If you’re defaulting on this and other loans, there’s a strong chance that your company is insolvent and will need to liquidate. It’s important that you seek the advice of a licensed insolvency professional to assess this.
I Think My Company Is Insolvent – What Do I Do?
If you can’t pay a bounce back loan, your first step should be to contact an insolvency practitioner. If your liabilities are greater than your assets then this means that the company is insolvent. In this case, you should liquidate the company, meaning that the bounce back loan will be written off. In a Creditors Voluntary Liquidation (CVL), the bounce back loan is treated like any other business debt. As bounce back loans did not require a personal guarantee, you will not be held personally liable so long as you have used the funds in the appropriate manner.
I Think I’ll Be Able To Repay My Bounce Back Loan In The Future – What Are My Options?
If you can’t pay your bounce back loan at present, but your company is not insolvent and there is a realistic chance of you repaying the loan with the right help, there are options available to you.
Your lender should have contacted you about the Pay As You Grow scheme, three months before your repayments were to be due, in order to provide you with the option of delaying repayments. However, if you’re still struggling, there are other refinancing and restructuring options available that will enable you to free up vital funds to put towards repaying your bounce back loan. These include the likes of:
- HMRC Time To Pay Arrangement: a payment plan between your company and HMRC where you’re given additional time to repay taxes owed
- Administration: provides an automatic stay on any current or pending legal actions, providing breathing space to restructure
- Company Voluntary Arrangement (CVA): a binding contract between your company and its creditors to pay back liabilities over a specified period of time
Key Message To Takeaway
If you can’t pay a bounce back loan your first step should be to contact an insolvency practitioner, regardless of whether you think your company may or may not be insolvent. They will be able to determine the position of the company and advise on the most suitable path forward from there. If the business is in fact insolvent, then the insolvency practitioner will guide you through the liquidation process. If there is a possibility of repaying the loans, then they will advise on the recovery strategies that could be put in place.
Our experienced team of licensed insolvency practitioners and business rescue professionals at Ballard Business Recovery are here to talk about any concerns you may have. If you can’t pay a bounce back loan and are concerned about the future, please don’t hesitate to get in touch with us today for confidential advice.
