Book a Virtual Meeting - Free Confidential Advice
If you need help understanding the best way forward for your company, we can provide confidential free initial advice. You can book a free virtual meeting or call us on 0800 612 5448..

Can I Liquidate With A Bounce Back Loan

Can I Liquidate With A Bounce Back Loan? Written by John A Waller, Director. June 3rd, 2022.

Introduced in May 2020, by the UK government with over:

But even these attractive loans will not be enough to save some companies. You need to understand the potential implications if you fail to repay the loan and your company is liquidated.

Therefore, talk confidentially to one of our insolvency experts via live chat, without obligation. We’ve helped many directors establish positive and practical solutions.

Can you write off a BBl?

Only through liquidation.

Trying to dissolve your company with one will not write off your BBL

If I want to switch my banking to another provider, can I transfer my Bounce Back Loan Scheme?

Suppose you are changing to a new bank or lender. In that case, your Bounce Back Loan Scheme facility will require repaying or keeping with your original lender. It cannot be transferred to your new finance provider.

What is the BBL Scheme?

The Bounce Back Loan Scheme (BBLS) provides good terms launched by the UK government to give mall businesses a quick source of affordable funds. 

Small UK businesses could borrow 25% of turnover up to £50,000 through the Bounce Back Loan Scheme.

Notably, 

  • interest was not charged for the first 12 months, and
  • The loan remains 100% UK government-backed. Therefore, directors do not provide assets as security or personal guarantees. 

What happens when you default on a BBL?

Defaulting on a BBL is not as important as a loan with a personal guarantee. Unlike traditional loans, BBL lenders retain no security over assets whatsoever.

The UK government advised lenders to retain standard practices for pursuing and enforcing loan defaults. So threatening letters, court action, and potentially bailiffs will commence should borrowers default.

The rollout speed of the Bounce Back Scheme left holes in the official legislation. One being lenders have to chase borrowers for unpaid loans through the courts.

However, lenders believe the volume of loan defaults will make it impossible to chase all defaulters. Additionally, concerns about public reaction may be an issue.

The critical point is that not paying back the loan is unlikely to yield decisive and immediate action from your lender. However, eventually, it will happen. 

Ignoring debt doesn’t mean the problem will disappear.

If your company is insolvent, it has its own legal responsibility. Director’s duties and responsibilities will now resume back to pre-pandemic times.

What is the result if you don’t repay your bounce back loan?

Suppose your company remains unable to continue paying back the Bounce Back Loan. In that case, your company is probably insolvent, as it no longer may repay debt as and when it is due.

The insolvency of a limited company puts directors at risk unless you comprehend what it means and how it transforms your responsibilities.

Insolvency shifts directors’ primary duties to protect the interests of creditors, not company shareholders. Therefore, paying:

  • employees, 
  • yourself, 
  • Creditors.

However, risks preference. This risks directors to wrongful trading claims, a severe civil offence.

A further example is repaying a debt you personally guaranteed, in preference to other creditors and debts. This would be considered a preferential payment.

In liquidation, What Happens to a Bounce Back Loan?

If the outbreak has hit your company hard and you cannot afford to repay its debts, you have to take action to protect the creditor’s interests. However, if the business is no longer viable, you need to close the company.

creditors’ voluntary liquidation (CVL) closes a limited company voluntarily, which has debts. A CVL requires a licensed insolvency practitioner to be appointed to:-

  • Sell all the business’s assets; 
  • repay the creditors in a prescribed order;
  • Close the company. 

Banks are usually secured creditors if your company liquidates, a