Will Bounce Back Loans be Written off? Expert Analysis

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 Governments stance to the question will bounce back loans be written off is a resounding no. If the company is solvent, this is definitely the case. There is no way a Bounce Back Loan can be written off

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.

However, there is a way in which the BBL can be written off. If a business is insolvent, a Bounce Back Loan can be written off through liquidation.

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.

Some businesses, classed as insolvent 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 through a formal liquidation prcoess.

If the company is liquidated, normally done through a Creditors Voluntary Liquidation (CVL) it’s possible to write off the Bounce Back Loan. A CVL  is where an Insolvency Practitioner is appointed to sell all the business assets, repay creditors, and then close down the company. As part of this process the Bounce Back Loan would be written off.

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.