Insolvency and Bounce Back Loans

If you have a bounce back loan and you can’t afford to make your repayments, there are several options to consider. If you need help or financial advice about insolvency and bounce back loans, make sure you contact the team at BRI Business Recovery and Insolvency.

What is a Bounce Back Loan?

The Bounce Back Loan Scheme was introduced by the UK government in May 2020 to support small and medium-sized businesses during the COVID-19 pandemic. The scheme allowed eligible businesses to borrow between £2,000 and up to 25% of their turnover, to a maximum of £50,000.

These loans were:

• 100% government-guaranteed
• Interest-free for the first 12 months
• Charged at a fixed interest rate of 2.5% thereafter
• Repayable over six years (later extended to ten years via the Pay As You Grow (PAYG) options)

Thousands of businesses used these Bounce Back Loans to stay afloat during lockdowns, whilst trading was being disrupted. However, since taking out the loan, there are many businesses that are now unable to meet their repayment obligations.

While the loans were low-cost and relatively easy to access, they are still debt, and if your business can’t repay the loan, they cannot simply be written off.

I Can’t Afford My Bounce Back Loan – What Happens Now?

If your business can no longer afford to repay the Bounce Back Loan, you’re not alone, there are options available. The best thing to do is to speak with your bank in the first instance and explain your predicament regarding the loan.  The bank will be able to assist with the following:

‘Pay As You Grow’ Adjustments

Before taking formal insolvency advice, check whether you’ve used all available PAYG options:

• Extend the loan term from 6 to 10 years
• Request interest-only payments for 6 months (up to 3 times)
• Take a 6-month payment holiday

These options may ease short-term pressure, but they won’t solve deeper cash flow problems. Also, extending the loan term will mean you end up paying more back in total, so this should be taken into consideration.

If that isn’t sufficient to alleviate your financial pressures then seek professional advice as early as possible; the earlier you seek help, the better chance you have of your business surviving. Contact our team today for help and advice.

The team at BRI can help you review you financial position and provide professional insolvency advice.

1. Review Your Financial Position

First, we can help you determine whether your business is insolvent. Warning signs include:

• Falling behind on payments (e.g. HMRC, suppliers, rent)
• County Court Judgements or statutory demands
• Relying on borrowing to cover operational costs
• Ongoing losses with no clear path to recovery

If your company is insolvent, you have a legal duty to act in the best interests of creditors — not shareholders or directors. We can help guide you through this.

2. Professional Insolvency Advice

If you think the PAYG option won’t work for you and your business, speak to a licensed insolvency practitioner immediately. Depending on your situation, we can help you consider:

• Informal options which avoid the need to use BRI.

• Company Voluntary Arrangement (CVA): For viable businesses, this allows for renegotiating debts, including the Bounce Back Loan, with creditors.
• Administration: A formal administration may help protect the business while a recovery plan is implemented.
• Creditors’ Voluntary Liquidation (CVL): If the business can’t be saved, liquidation allows the company to close in an orderly way. The Bounce Back Loan is essentially written off at the end of the CVL.

Once we know all the details of your situation, our experienced insolvency practitioners can listen and discuss which options are available for your company.

What About Personal Liability?

One of the key protections of the Bounce Back Loan Scheme is that it was not personally guaranteed. That means, in most cases, you are not personally liable for the loan, provided the money was used properly for the benefit of the business.

However, if it’s found that the loan was misused (e.g. withdrawn for personal use, taken out when the business was already insolvent), directors could face personal consequences, including disqualification or action from the Insolvency Service.

Whatever your situation, we urge you to seek advice as early as possible to minimise consequences.

Advice on Bounce Back Loans and Insolvency – Take Action Early

Ignoring Bounce Back Loan repayments won’t make the problem go away. If your business is struggling to meet its obligations, speak to the team at BRI as early as possible. The sooner you act, the more options you’ll have.

We offer free, confidential consultations to directors who need help understanding their position and making the right next move. Don’t hesitate – contact us today.