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The PAYG scheme is 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. However, there are ways around this.
One of the main benefits of the BBLS is the fact that the loan itself is unsecured. This means that the loan is taken out without any collateral such as property. We wouldn’t necessarily advocate unsecured loans but, in this instance, it might be beneficial because it 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. They will still be expected to make repayments unless the situation gets very desperate.
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If your business goes through liquidation then the BBL will work in the same way as any other loan that was taken up in that time. This means that should the company become insolvent and needs to enter a formal liquidation process, the Bounce Back Loan will be included.
There are two ways to push through with insolvency:
A creditor forces you into liquidation but this is a long process, including a court case.
Directors can push through the liquidation of the company themselves. This is known as a Creditors Voluntary Liquidation (CVL).
A licensed insolvency practitioner will go through the entire process. This means that 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 is included in this.
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Bounce Back Loans (BBLS) were introduced in March 2020 to help out struggling businesses. This period was the start of the first lockdown and that meant it was also the start of a really tough time for a lot of business owners, particularly those who worked in sectors such as hospitality.
Essentially, they 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. This amount of cash varied 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 onto 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 BBLS has given out £46-billion since it came into action, helping millions of people in a time of crisis.
As noted at the start, many businesses will see the BBLS as an opportunity to invest in their future. With this in mind, 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 cashflow 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 one a single monthly payment towards your 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.
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There are two different levels of fraud: soft fraud and hard fraud.
Soft fraud is overestimating figures in order to gain access to a larger loan. Exaggerations will be 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 mislead those offering the BBLS, so it’s important to make sure that you will be fully prepared for any negative outcome.
We can help you to understand the makeup of your situation and we can work out the best solution for your problem.
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Overall, the BBLS provided a necessary respite for many flailing businesses. Like the furlough scheme, it allowed businesses to move through the pandemic with less of a cash flow concern than they would have had.
However, there are many people who will find themselves in a financial struggle after taking up the option of a BBL. Here at Business Helpline, we’re here to help you! We can discuss all of your options and help you plan for a better future.