Struggling to repay your Bounce Back Loan?
When Bounce Back Loans were introduced in March 2020, they were hailed as a lifeline for many businesses whilst the growing pandemic crisis was impacting their business. The loans enabled businesses to secure funding of up to £50,000 without providing a personal guarantee and in addition there was nothing to pay for 12 months. Many businesses took these out in good faith expecting life to return to normal in the foreseeable future. Who could have predicted though that all this time later, many businesses are still to return to pre-pandemic operating levels?
As increasing numbers of businesses approach that 12-month anniversary and are faced with the prospect of having to start repayments, the reality is that many of them are unable to afford them. So, what are the options if you find yourself in this situation?
Firstly, the government has thankfully recognised that this situation is faced by many businesses and that they still require help. As a result, they have introduced the Pay as You Grow (PAYG) Bounce Back Loan Scheme which provides three options:
- Delay payments for a further 6 months even if you have not made any repayments yet.
- Lengthen the term of your loan from 6 to 10 years, effectively halving your repayments.
- Make interest only payments for 6 months, ensuring you are not accumulating more interest as you would with a payment holiday.
However, unfortunately this is still not enough for some companies as they may have several other loans which are due for repayment.
One of the advantages of the Bounce Back Loan was that it was guaranteed by the government so that in the event of a business being unable to repay the loan, the bank could seek repayment from the government. However, this can only happen if your business is declared insolvent.
If your business is still viable and making profit though then restructuring and refinancing the loan may be a better option. Discussions with your creditors to lower your outgoings may also be feasible.
For those with numerous debts it may be possible to enter into a Company Voluntary Arrangement (CVA) with the agreement of all your creditors, this will enable you to make one monthly payment towards your debt over a set number of years with a portion allocated to each creditor.
If none of this is possible and you intend to liquidate your business, then your bounce back loan would be included in the process. You can be forced into liquidation by a creditor, which is a lengthy and complicated process or you can initiate the liquidation yourself, known as Creditors Voluntary Liquidation. Following liquidation, the company will cease to exist and all loans, including the Bounce Bank Loan, will be written off. You will not be held liable for the Bounce Back Loan if you have used them in the appropriate manner as dictated by the government in the terms. This means that the funds must benefit the business and not be used for personal reasons. If you are in any doubt as to whether you may have misused the funds, then you must seek expert guidance as soon as possible.
If you have any questions or would like to discuss this further please feel free to call us on 01173 700 079 or e-mail firstname.lastname@example.org.