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Can't Pay Bounce Back Loan?
If you cannot afford to pay it back then you need to liquidate the company.
Can I liquidate my company if I have received a Bounce Back Loan?
The Bounce Back Loan Scheme was a ray of hope for thousands of companies during the Covid-19 pandemic.
But what if the injection of cash isn’t enough to navigate your business through the recession that has gripped businesses across the UK?
The loan scheme allowed you to borrow between £2,000 and £50,000 to cover expenses related to Covid-19 and has been a huge boost for businesses. But some are now still struggling and may need to start considering the possibility of liquidation.
You can still liquidate your company if you have taken out a loan. If you still find it difficult to trade because of the turbulent environment despite the extra support, you’ll still be able to use a creditors voluntary liquidation to close an insolvent company.
While you’ll clearly want to recover your business if possible, if it’s insolvent then liquidation may be one of few realistic options. However, if you default on the loan you may be able restructure the company if it was viable if it wasn’t for the loan
What will happen to the Bounce Back Loan if I liquidate?
The loan will become an unsecured debt if you liquidate. This means creditors do not have substantial claims over assets belonging to the company – unlike a secured debt.
Crucially, if the loan is unpaid you are NOT held liable. This is because the loans are guaranteed by the Government, meaning it is the Government that will repay the loan when the debt crystallises. Whoever issued the loan will be able to approach the Government for repayment. Usually, the company director would be held responsible, but not in the event of a Bounce Back Loan.
Fraudulent trading is something to take very seriously and directors should be reminded that their conduct is still investigated during the liquidation process and any director involved in wrongful actions or misfeasance will be held personally liable.
If you have taken out a Bounce Back Loan are your company is still struggling and you are forced to consider liquidation then this is still an option and the loan will be classed as an unsecured debt.
Directors should be wary that although they will not be personally liable for the loan, if you are found guilty of abusing the scheme you could be found guilty of fraudulent trading.
So, is it possible to write off a Bounce Back Loan?
The answer is no. The loan must be paid back in full, with interest, within six years. The only circumstance under which the loan may be written off is if your company fails and enters Liquidation as mentioned before. You may be eligible for a repayment plan if you are unable to repay the loan.
Government Position on Refinancing or Write Off
John Glen, Minister of State (Treasury) (City), Economic Secretary to the Treasury, declared on 16 February 2022:
There is no government policy mandating the cancellation of all loans. Under the Bounce Back Loan Scheme (BBLS), all loans are subject to collection action by lenders or law enforcement in cases of major fraud or financial crime.
The government has insured the Bounce Back Loan Scheme, however the British Business Bank is in charge of managing the loans. Therefore, it is not government policy to forgive these loans, and a limited liability corporation appears incapable of doing so.
if you have a Bounce Back Loan do not try and dissolve the company! All the banks receive a notice from Companies House if you try and they will object. So you either have to liquidate the company voluntarily or wait for the bank to apply through the court (risky, stressful and will take a long time)