Bounce Back Loan Usage

Bounce Back Loan Use

Bounce Back Loan Use. Written by John A Waller. Reviewed June 10th, 2024.

How should you use your company’s Bounce Back Loan (BBL)?

The use of Bounce back loans, though not written-in-stone, rules however existed when borrowing money on the BBL scheme. Accordingly, borrowers needed clarification on its use. However, its primary use enables your business’s ‘economic benefit,‘ including buying new equipment or machinery, hiring new staff, or investing in new premises. However, the loan exists for the company’s benefit, not you. </span>

Bounce back loans were granted on the condition that they should not be used for personal purposes, but could be used to buy a company asset, such as a vehicle, that would provide economic benefits to the company.

The Bounce Back loans were made for business purposes, such as buying a company asset that would provide an economic benefit to the business.

Therefore, using the money for your personal use remains not allowed.

So Bounce Back Loan Use requires directors to account for the expenditure with supporting documentation.

Directors need to ensure they have an understanding of their directors duties and responsibilities staying clear of bounce back loan fraud.

Taking into account your working capital requirements and ensuring the payment of your daily operating costs, the loan could be beneficial to avoid closure and insolvency. Cash flow insolvency indicates you cannot pay bills when they fall due, and BBLS has helped UK businesses prevent this.

So examples of the use of bounce back loans use: –

  • Payment of Wages

In most companies, payroll remains a large chunk of a business’s operation cost. You may use your BBL to bolster wages when cash flow continues tight.

  • Supplier payments

Paying supplier bills as and when due keeps a business running and maintains relationships with suppliers, especially during the COVID 19 pandemic.

  • Commercial rents

A moratorium in place stopped commercial leases from being forfeited, but it ended on the 31st of March 2021. If the moratorium isn’t extended again and you have rent arrears, then use your BBL to pay off these arrears, perhaps in instalments, by agreement with your landlord.

  • Business Utilities

Use the BBL to pay your utility bills (heat, light and water). 

  • Business rates

For many companies, business rates make up a large part of their outgoing expenses. Indeed, the availability of business rates relief continues for some industries in England, and a BBL helped. 

Bounce Back loans are repayable

The loan must be repaid over 6-10 years, with payments starting 12 months after receiving it.

Although, if your company doesn’t repay the money it borrowed, the Insolvency Service may investigate, even if the company dissolved.

So how does misconduct affect you and your company?

Being guilty of misconduct risks:

  • Your company could be wound up by the Court.
  • You risk disqualification as a director.
  • A Court Order may be made to pay compensation to your creditors.

The insolvency service may investigate your bounce back loan use along with other coronavirus (COVID-19) related assistance, such as the:

  1. Job Retention scheme (furlough) and
  2. Eat Out to Help Out scheme.
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Bounce Back Loan advice for Company Directors

Directors should seek professional advice if they have Bounce Back Loan worries regarding repayments. The UK government introduced the COVID-19 support scheme to support businesses through the pandemic. However, repaying the loans has been difficult. So ensure you seek advice sooner than later.
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