The Bounce Back Loan scheme provided vital support to businesses during the pandemic, offering much-needed funds to weather the economic storm. However, as time has passed, some borrowers have found themselves unable to meet their repayment obligations. If you’re struggling to repay your Bounce Back Loan and personal liability is worrying you, don’t panic. There are options to explore, but they come with strict criteria and require guidance from a reputable, licensed insolvency practitioner.
This guide will walk you through the potential solutions, including the possibility of a Bounce Back Loan write-off, and how to navigate this challenging situation. If you’re looking for immediate advice about your Bounce Back Loan repayments and your options, our experts are here to help.
“No lender was allowed to ask for a personal guarantee”.
During the Covid pandemic, 1.5 million businesses chose to take out a Bounce Back Loan, leading to a total of £47 billion being lent. The terms for these loans were purposefully set to be supportive to directors and no lender was allowed to ask for a personal guarantee.
Even for a sole trader or small partnership who, without the protection of a limited company, often risk their personal assets when taking out a loan, the Bounce Back Loan terms meant that no recovery action is to be taken over a principal private residence (the house you and your family live in) or a primary personal vehicle (your main car).
The Government guaranteed 100% of the Bounce Back Loan scheme, which means if the company which took out the loan enters a formal insolvency process (such as liquidation), the Government repays the lender in full.
What are the options if you can’t repay a Bounce Back Loan?
While the rules around Bounce Back Loans are stringent, there are solutions you might be able to consider:
Repayment holidays or loan term extensions: If you haven’t already taken advantage of this, the scheme allowed businesses to apply for a six-month repayment holiday. Note that interest accrues during this time, increasing the total amount owed. The loan term may also be extended accordingly.
Restructured repayment plans: You might be able to negotiate with your lender to extend the term, reduce monthly payments, or even partially write off the loan. Keep in mind that lenders are under no obligation to agree to these terms.
Formal insolvency proceedings: If your company is no longer viable, entering liquidation could result in the loan being treated as an unsecured debt. This means the lender will receive a share of any assets remaining after secured creditors have been paid.
Seeking advice from a licensed insolvency practitioner is the best way to ensure you’re exploring all viable options, including a Bounce Back Loan write-off where possible. Call our expert team for free, confidential advice.
Is there a Bounce Back Loan loophole?
The term “Bounce Back Loan loophole” often arises when discussing potential ways to alleviate repayment challenges. While there’s no legal loophole that allows you to bypass repayment, there are legitimate processes that may help:
For limited companies: Entering a formal insolvency procedure, such as a Creditors’ Voluntary Liquidation (CVL), can result in the loan being partially written off if there are insufficient company assets to repay it.
For sole traders: An Individual Voluntary Arrangement (IVA) offers a structured approach to consolidate and reduce debt payments.
These options are not “loopholes” in the traditional sense but rather structured solutions within the bounds of the law.
Understanding Bounce Back Loan fraud
The streamlined nature of the Bounce Back Loan application process led to cases where businesses inadvertently or intentionally broke the rules. These violations can trigger investigations by HMRC.
Common compliance issues include:
Ineligibility: Borrowers needed to meet specific criteria, such as trading before March 2020 and being adversely affected by the pandemic. Loans taken without meeting these criteria could be deemed fraudulent.
Misuse of funds: Loans were intended for business purposes like operational costs or payroll. Using them for personal expenses or investments could raise red flags.
Incorrect information: Providing inaccurate or false details during the application process is a compliance issue too.
Failure to maintain records: Proper documentation of how the funds were used is crucial to demonstrate compliance during any investigation.
If you’re worried about any of these issues, it’s best to seek professional help. That’s where our experts come in. We’ve dealt with 1000s of Bounce Back Loan cases since 2020, all in complete confidentiality and with no judgement. Give us a call to see how we can help you.
How HMRC handles Bounce Back Loan investigations
When compliance issues arise and the company cannot repay its loan, HMRC and lenders may decide to investigate. This can lead to attempts to recover the debt from company directors or owners personally.
To mitigate risks, it’s essential to:
- Maintain accurate records of loan usage.
- Communicate proactively with lenders and HMRC if you’re struggling with repayments.
- Seek professional advice to ensure you’re managing the situation correctly.
Even in the most challenging circumstances, there are often ways to protect yourself and find a path forward.
Using an insolvency solution to manage Bounce Back Loan debt
As we mentioned above, if repaying your Bounce Back Loan isn’t feasible then an insolvency solution may offer a way to resolve your financial difficulties. To recap on the options that could be available to you:
For limited companies
Company Voluntary Arrangement (CVA): This allows you to restructure debts and continue trading if the business is still viable.
Creditors’ Voluntary Liquidation (CVL): If the business cannot continue, this process winds up the company and distributes its assets to creditors.
For sole traders
Individual Voluntary Arrangement (IVA): This personal insolvency solution consolidates debts into manageable payments over time, often avoiding bankruptcy.
If you’re finding it difficult to repay your Bounce Back Loan, don’t face the stress alone. Our professional, licensed advisors can help you understand your options, including the potential for a Bounce Back Loan write-off or restructuring.
We’ve helped thousands of businesses and individuals navigate these challenges, always with confidentiality and no judgment. Reach out to our experts today for clear advice and support tailored to your situation.
