Bounce-back loans were provided during a time of need. The aim of these Coronavirus loans was to help keep UK businesses afloat when their futures could have been in question. While these loans did help many business owners, many are now struggling with the repayments for bounce-back loans and CBILs.

The pandemic was particularly hard for smaller and medium-sized businesses, but these loan schemes allowed them to access finance quickly. The reality is that many of these businesses still haven’t bounced back!

Bounce back loan scheme

The bounce-back loan scheme (BBLs) was available to all trading businesses in the UK at the time. As the bounce-back loan scheme was self-certified, applications were unfortunately open to misinterpretation and potential fraud, too.

Businesses were only allowed to apply for one bounce-back loan from one lender. Upon applying, they were asked to provide their annual turnover from 2019. This figure would be used to determine how much you could borrow, with a cap of 25%. £50,000 was the maximum loan that businesses could receive through this loan scheme.

For companies that were incorporated after the 1st of January 2019, a projected business turnover could be used on the loan application. During the application process, the British Business Bank provided a lot of information for companies.

Those applying for loans were also advised on what the money could be spent on – the economic benefit of the company. Directors who applied for the correct amount of money and used it for the economic benefit of the company should face no issues if they have to place their company into liquidation.

All of the bounce-back loans were government-backed from accredited lenders. This means that the government would be responsible for paying the loans back if the company was unable to.

CBILs loan scheme

The Coronavirus Business Interruption Loan Scheme (CBILs) was also provided in 2020 to businesses that struggled as a result of the pandemic. Lenders facilitating these business interruption payment loans could offer up to £5 million in various forms.

Personal guarantees could only be taken on Coronavirus Business Interruption Loan Schemes over £250,000. Those borrowing less than this figure were covered by the government guarantee. The application process for a CBILs was a little bit more in-depth than the BBL.

What happens if I can’t pay my bounce-back loan?

If you can’t pay your bounce-back loan, you’re probably feeling quite worried. The important thing is that you’re not alone, and you have options available to you.

One option that has helped many businesses is the Pay As You Grow scheme (PAYG). One way the scheme helps is by allowing you to pay the bounce-back loan repayments over a longer period of time, reducing the monthly payments to your accredited lender.

Changing the repayment terms from six years to ten can provide huge benefits to those who are currently struggling with cash flow problems but can see hope for the future following the bounce-back loan scheme.

As a result of paying over an extended period, more interest will be added to your loan repayment total. However, breathing space in the first instance may be exactly what you need.

Another way that the PAYG scheme can be useful is by offering you a six-month repayment break. This means that all monthly payments are paused for six months while your business gathers more money. You can also request to only pay the interest payments on your Coronavirus loan for up to six months.

You might have heard many people try and strike a company off with a bounce-back loan – please don’t listen to them. Doing this could get you into serious trouble and has actually landed some directors in jail!

When Companies House advertise the business being struck off, the banks are being notified and objecting to it. This can land you in a lot of trouble as a company director and is not worth the risk. You could end up being made personally liable for your bounce-back loan. You cannot strike a company off with a bounce-back loan.

Will bounce-back loans be written off?

Sometimes, loans can be written off; however, certain criteria must be met. Loans that have been personally guaranteed by a director are unlikely to be written off. Fortunately, the bounce-back loans were guaranteed by the government. This means that provided you have acted responsibly and used the money for the economic benefit of the company, you will not be made personally liable if you decide to liquidate your business.

Responsible directors who enter a creditor’s voluntary liquidation will find that the bounce-back loan is written off. You must not have committed any bounce-back loan fraud or any wrongdoing within the company.

Bounce-back loan fraud

Bounce-back loan fraud can be identified in a few ways. Here are some of the most common ways.

• Applying for too much money
• Applying and keeping the loan money from more than one lender
• Using the loan money for your own personal benefit

If you have committed bounce-back loan fraud, it’s best to seek advice as soon as you can.

We know how tricky it can be to make the monthly repayments on your loan, and we also know that there are many other directors who are struggling too. At Director First, we’re here to offer you honest advice regarding your bounce-back loan. Contact us today.