Bounce-Back Loan Repayment Problems – What Happens If You Can’t Pay?
The Bounce Back Loan Scheme (BBLS) provided crucial financial support to businesses during the pandemic, but as repayment deadlines loom, many business owners find themselves struggling to meet their obligations. If you’re facing difficulties repaying your Bounce Back Loan, it’s essential to understand the consequences and explore your options.
Why Are Businesses Struggling to Repay Bounce Back Loans?
Many businesses took out Bounce Back Loans to stay afloat during the uncertainty of the COVID-19 pandemic. However, not all have fully recovered, leaving them unable to meet repayment demands. Common reasons include:
- Slow business recovery – Post-pandemic trading conditions remain tough.
- Increased costs – Inflation, supply chain disruptions, and rising interest rates have put additional strain on finances.
- Cash flow problems – Many businesses face reduced income, making it difficult to meet loan repayments.
- Debt accumulation – Additional debts accrued alongside the Bounce Back Loan add further pressure.
What Happens If You Can’t Repay Your Bounce Back Loan?
If you’re unable to repay your Bounce Back Loan, the consequences depend on your company’s financial status and the steps you take. Here’s what you need to know:
1. Payment Holiday and Loan Term Extensions
The government introduced options to help struggling businesses, including:
- Extending the loan term from 6 to 10 years to reduce monthly repayments.
- Taking a 6-month repayment holiday to provide temporary relief.
- Switching to interest-only payments for a limited period.
If you haven’t explored these options yet, they could help you manage your repayments more effectively.
2. Defaulting on the Loan
Bounce Back Loans were 100% government-backed, but they are still business debts. If your company defaults on its loan, the bank will first attempt to recover the money from the business itself. Unlike personal loans, directors are not typically personally liable unless there was fraudulent activity involved.
3. Company Insolvency
If your business can’t repay its debts, including the Bounce Back Loan, insolvency may be the next step. There are several insolvency options:
- Creditors’ Voluntary Liquidation (CVL) – If your company is no longer viable, liquidation may be the best solution.
- Company Administration – If your business has potential but needs restructuring, administration could provide breathing space.
- Company Voluntary Arrangement (CVA) – A CVA allows you to negotiate with creditors and make affordable repayments over time.
4. Potential Investigations and Fraud Risks
If you can’t repay the loan, the lender or the Insolvency Service may investigate whether the loan was used correctly. If misuse or fraud is suspected (e.g., using funds for personal gain or falsifying application details), directors could face personal liability and legal action.
What Should You Do If You’re Struggling to Repay?
If you’re unable to meet your Bounce Back Loan repayments, act now to explore your options:
- Speak to your lender – They may offer repayment flexibility.
- Seek professional advice – An insolvency practitioner can help you navigate the best course of action.
- Consider selling your business – If your company is struggling, selling to an experienced buyer like We Buy Any Firm could be a viable solution.
How We Can Help
At We Buy Any Firm, we specialize in buying distressed businesses quickly and efficiently. If you’re struggling with Bounce Back Loan repayments and looking for a way out, we may be able to provide a hassle-free solution to help you move forward.
(please note, with regards to bounce-back loans if you have misused the BBL scheme you could be personally held liable even though you retire from your company)
Contact us today for a confidential discussion about how we can assist you.