Bounce Back Loan Support

Bounce Back Loan Support

What are Bounce Back Loans?

Bounce Back Loans (BBLS) were introduced in March 2020 to help out struggling businesses. This period was the start of the first lockdown, a really tough time for a lot of business owners, particularly those who worked in sectors such as hospitality.

Essentially, the Government offered a big lump of short-term cash that could have been used to fix some glaring financial concerns or it could have been invested with a view to long-term future planning.

The loans ranged from £2,000 to £50,000. However, the amount that you could borrow was capped at 25% of your turnover from the previous year, or your estimated turnover.

Businesses that hadn’t already borrowed the full amount could also “top-up” their initial loan. The minimum amount that you could add to the initial loan was £1,000.

Bounce Back Loans were completely backed by the state and required no repayments or interest within the first 12 months. After 12 months, banks charge a fixed 2.5% annual interest on top of their initial loan.

The Bounce Back Loan Scheme has given out £ 47 billion since it came into action, helping millions of people in a time of crisis.

Will Bounce Back Loans be Written Off?

Bounce Back Loans won’t be written off by the Government.

But, you can write off a Bounce Back Loan if the company becomes legitimately insolvent. In this case, the Bounce Back Loan can be written off through liquidation.

There are other options if you’re struggling to pay off a Bounce Back Loan and don’t want to liquidate your company. However, we would always suggest you seek professional advice first.

What will happen if I can’t repay my Bounce Back Loan?

If you can’t pay your Bounce Back Loan there are options available to you to help with your repayments. One of these options is to utilise the Pay As You Grow scheme (PAYG).

The PAYG scheme was designed to offer a little bit of wriggle room for those who might not be completely on top of their payments. Making repayments might still feel like a step too far for many businesses, so this scheme aims to alleviate some of the pressures.

We’ll explain how the PAYG scheme may be able to help you in the next section. We do need to look at other intricacies of the loan first though.

One of the main benefits of the Bounce Back Loan Scheme was the fact that the loan itself was unsecured. This means that the loan was taken out without any collateral such as property.

We wouldn’t necessarily advocate unsecured loans but, in this instance, it might have been beneficial. The Bounce Back Loan comes with a government guarantee because they gave 100% security to the banks for these loans.

However, government backing only comes into play if a business is declared insolvent, so a trading business that is still in operation will still have to pay the money back themselves.

Therefore, while company directors should feel a little relief, they should also be aware that governmental intervention is very much the last-case scenario. Businesses will still be expected to make repayments unless the situation gets very desperate.

How can the Pay As You Grow (PAYG) Bounce Back Loan scheme help?

The PAYG scheme allows a company who has taken out a Bounce Back Loan, three main ways of reducing the monthly financial burden if they are struggling to find the money to repay what they owe. If you cannot afford to repay your Bounce Back Loan, here is how the PAYG scheme could help:

1. The chance to delay repayments for six months. This is on top of the first-year payment holiday which you will have been given when you took out the Bounce Back Loan. You do not need to have made any repayment towards your Bounce Back Loan in order to qualify.

2. You can lengthen the term of the Bounce Back Loan from six years to ten years. By doing this, you can halve your monthly repayments which could make a huge difference to your cash flow during this time.

3. You can ask to make interest-only payments for six months. This will lessen the amount of your monthly repayment for these months, while also ensuring you are not paying any additional interest as you would if you took a payment holiday.

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Closing a limited company with a Bounce Back Loan?

You cannot strike off a company with a Bounce Back Loan. However, you can close the business with a Bounce Back Loan if the business becomes insolvent and you need to enter a formal liquidation process.

You can go into the process of liquidation if:

▪️ A creditor forces you into liquidation but this is a long process, including a court case.

▪️ Directors push through the liquidation of the company themselves. This is known as a Creditors Voluntary Liquidation (CVL).

A licensed insolvency practitioner will take a business through the entire process.

They will identify company assets, sell off those assets for the benefit of creditors, and they will organise the whole procedure on your behalf.

The final result of the liquidation is that the company will no longer exist as a legal operator, and any debt remaining from this point forward will be written off (unless it has previously been secured with a personal guarantee). A Bounce Back Loan would be written off as part of this liquidation process.

Can a director be made personally liable for a Bounce Back Loan?

A director can be made personally liable if payments are made in terms of preference as opposed to necessity.

What this means is that payments were made to certain creditors while others were ignored. Using the loan to pay off certain creditors whilst simultaneously ignoring others.

A director might have also misused the Bounce Back Loan. If the administrator or liquidator comes to analyse the situation and finds the loan has been misused, they could make you personally liable for that situation.

If you follow the agreement in good faith and knowledge, you are not likely to be left personally liable for any of the debts that come your way.

Do you think you've taken a Bounce Back Loan fraudulently?

There have been many directors who’ve been caught using Bounce Back Loans fraudulently in the last few years. Some have been banned from being a director, while others have faced prison sentences.

As a director, this can be a really scary prospect.

It’s important to quickly identify if you’ve taken the loan legitimately and then seek advice from a professional.

There are two different levels of fraud: soft fraud and hard fraud.

An example of soft fraud would be overestimating turnover figures to gain access to a larger Bounce Back Loan.

Exaggerations may have been based on fairly legitimate evidence. Many people will fall into this category and they will need advice on how to best deal with this situation.

If you think you are going to be accused of BBL fraud then you should immediately seek legal help. You may have accidentally overestimated figures or unintentionally misled those offering the Bounce Back Loan Scheme, so it’s important to make sure that you will be fully prepared for any negative outcome.

Our advisors can help you to understand the makeup of your situation and work out the best solution for your problem.

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What other options do you have to pay a Bounce Back Loan?

As noted at the start, many businesses will see the BBLS as an opportunity to invest in their future. With this in mind, if you’re struggling to repay, you might be able to come to an arrangement with HMRC.

These are called Time to Pay (TTP) arrangements. You could be granted an additional 12 months to keep on top of your payments if you are able to put together a convincing cash flow forecast, highlighting where you believe you’ll be making your profit.

Some businesses may be juggling a series of loans alongside their BBL and, in that instance, a Company Voluntary Arrangement (CVA) could be the best solution. The CVA will allow a debtor to make a single monthly payment towards creditors for a set number of years.

Only a licensed insolvency practitioner can sanction your CVA and it will also have to get the consent of your creditors. You will need to provide a thorough plan that your creditors can get behind.

For confidential advice and support with your Bounce Back Loan, call our free phone number 0800 088 2142 and one of our trained experts will be happy to help.

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    Is the Governments guarantee concrete?

    Can a Bounce Back Loan help with other debts?

    What should I do if I've used a Bounce Back Loan inappropriately?

    If you’ve used a Bounce Back Loan inappropriately, it’s crucial to take immediate steps to rectify the situation.

    Firstly, review the terms and conditions of the loan to understand the specific breaches.

    Then, consider contacting the lender to explain the situation and discuss potential solutions, which may include repaying the misused funds or adjusting your repayment plan.

    Transparency and proactive communication with your lender are key. If necessary, seeking legal or financial advice to explore your options and mitigate any potential consequences is advisable.

    What should I do if I can't pay my Bounce Back Loan?

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