Will Bounce Back Loans be written off?
Bounce Back Loans were brought in during Covid times to help businesses in distress. The loans provided were up to £50,000 dependent upon company turnover. At the time of the pandemic, they were a much-needed lifeline. But, now with many businesses struggling to pay them back, many directors are asking will Bounce Back loans be written off.
The answer completely depends on the company’s financial situation which we’ll talk you through in this article. Primarily it is dependent upon whether your business is solvent or insolvent.
If the company is solvent, the simple answer is no. Businesses that are trading are expected to pay them off within the 6-year period that was allotted by the Government at an interest rate of 2.5%. There are however some measures that can be put in place to help you if you’re struggling to repay.
What can you do if you can’t repay a Bounce Back Loan?
There are three ways the Government put forward to help with repaying a Bounce Back Loan through the PAYG scheme (Pay As You Grow), which was introduced in September 2020.
As a business owner, you can extend the payment period to 10 years with the interest rate remaining the same.
You can take a 6-month break from the payments once during the lifetime of the loan.
Businesses can also just pay the interest on their loan for 6 months. This option can be taken 3 times during the loan term.
These options for breathing space can be hugely beneficial to businesses that are expecting an uplift in their trade and who find themselves struggling temporarily.
Get Advice Online
Insolvent business with a Bounce Back Loan
There are however businesses that are classed as insolvent and are unable to pay the loan off at all. An insolvent company is a company where liabilities are higher than the assets within the business. In this case, there is little choice but to close the company down.
It is therefore possible to write off a Bounce Back Loan if the company is liquidated, normally done through a Creditors Voluntary Liquidation. This is where an Insolvency Practitioner is appointed to sell all the business assets, repay creditors, and then close down the company.
Can you be made personally liable for your Bounce Back Loan?
If you can’t pay back the Bounce Back Loan and your company is liquidated, then you will not be held personally liable, provided the loan has been used correctly.
If however, you have used the loan for other purposes other than those which benefit the company, such as buying personal assets. Or if you’ve used the BBL to pay certain creditors ahead of others you risk making preferential payments which could lead to you being personally liable.
Will Bounce back loans be written off conclusion
There is no straight forward answer to the question will Bounce Back Loans be written off. It’s all dependent on if the company is solvent or insolvent. If your company is insolvent then you should close your company.
If you feel you’re in this position and require some advice from a trained expert, then book a call with Business Helpline and we’ll talk you through all the available solutions to you. Our advice is completely confidential, and we can help to alleviate any stress you’re suffering from.
Give us a call on 0800 088 2142.
Get Free Business Advice
If you are looking to get advice for your company, taking advice at an early stage is crucial. Business Helpline is committed to providing free impartial help and advice to businesses and company directors.