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Consequences of Not Repaying a Bounce Back Loan

Consequences of not repaying a Bounce Back Loan? Written by John A Waller. Updated December 9th 2023.

Can I liquidate with a Bounce Back Loan? Yes

Many directors are concerned about the consequences of not repaying a bounce back loan. Rishi Sunak, the former UK Chancellor of the Exchequer, and his team offered over a million UK businesses the opportunity to apply for a bounce-back loan to help during the current Coronavirus pandemic.

Unfortunately, many companies are starting to fail as the loan runs out. However, liquidation remains an option, with many companies only holding on but likely to fail.

So what are company directors to do?

Can I close a company with debts and start again?

Firstly, do not panic.

HBG Advisory – licensed with its Insolvency Practitioners to support failing companies while protecting creditors.

Please contact a member of our team on 0808 280 3496, who will gladly help you and your company during these troubled times. All initial advice remains free and confidential.

  • Having a Bounce Back Loan & Liquidation?
  • Bounce Back Loan treatment if the company goes bust?
  • Are you required to pay back a Bounce Back Loan?
  • Will a Bounce Back Loan be therefore written off if I don’t pay it back?
  • Bounce Back Loans & personal liability?
    • Unable to repay your Bounce Back?
    • Bounce Back Loan & paying off debt?

How long do I have to repay my Bounce-Back loan?

Initially, the Bounce Back Loan Scheme loans were repayable over a fixed six-year period.

Since November 2020, borrowers who received a bounce-back loan now have up to 10 years to repay, subject to agreeing with your lender.

Are you required to pay Back a Bounce Back Loan?


Repayment remained a condition of the loan for its eventual repayment.

The Bounce Back loan scheme offered generous terms to ensure that the loans remain supportive to businesses in the UK throughout the current pandemic.

Bounce Back Loan interest rate has been set at 2.5% per year. The loan terms offered to extend over six years.

Effective February 2021, the UK government has added further support to businesses by:

  • Companies seeking a re-payment holiday;
  • Extend the term of the loan term;
  • Request 6-month interest-only repayment periods up to three times over the loan duration.

If I fail to repay, will the loan be written off?

Yes If your company liquidates, then any debt owed by the former company remains written off if the liquidator has insufficient funds to pay out to creditors.

Directors must seek immediate help if worried about repayment of a bounce-back loan, as they remain not liable, provided no misfeasance or wrongful trading has happened.

Consequences of not repaying a Bounce Back Loan and Liquidation?

Operating a limited company that offers directors limited liability, protecting the division between company debts and the individual.

If you as a former director are clear of any wrongdoing or misdemeanour, you can act as director in the future. And be removed from the debt of the company.

Only a licensed insolvency practitioner remains authorised to be appointed liquidator of a limited company. Creditors and BBl lenders deal directly with the liquidator once appointed. The liquidator, who then pays money out, not the former directors.

For further reference, please view Liquidation and bounce back loans.

Do Bounce Back Loans have to be repaid?

Yes, the borrower remains liable once in receipt of the loan. However, many directors remain concerned about who remains liable, especially if they default on payment.

The UK Government allows accredited lenders to continue collecting default loans. However, the market in the UK shows signs of companies potentially defaulting or entering insolvency.

What Happens to the Bounce Back Loan if the Company Goes Bust?

One of the unique points about the Bounce Back Loan Scheme remains that the UK government guaranteed them. So in the case of a company going bust, HMRC will compensate the financial provider who offered the loan.

For the director, the loan remains written off, as per the normal rules of company liquidation.

Since no personal guarantees were required with this type of loan application, there should be no personal liability, barring the exceptions laid out below.

What may be impacted remains your ability to borrow money in the future, since any default will be logged on your credit record. Some lenders have intimated they wouldn’t lend in the future to someone who defaulted on a bounce-back loan.

Consequences of not repaying a Bounce Back Loan? Bounce Back Loans & Personal Liability?

When Company Directors applied for a bounce-back loan. They confirmed as part of the acceptance of the loan that their limited company was solvent at the time of application and not trading insolvent.

Therefore, using the loan for legitimate purposes meant the directors remained safe from personal liability or other actions, as the BBLs remain as unsecured debts.

However, certain Coronavirus Business Interruption Loans (CBILs) require directors to give supporting guarantees for up to 100% of the amount borrowed.

Comparatively, Bounce Back Loans scheme lenders require no guarantees, making the process easier.

Please note, though, licensed insolvency practitioners remain required to investigate the company’s trading before the appointment of the insolvency practitioner. Let’s assume that any questions remain about how company directors made false claims while applying for a loan. In that case, the liquidator will then alert HMRC if the company remained insolvent when the application made.

Currently, the HMRC has yet not declared how they will deal with serious abuse of the system.

Can I dissolve my company owing a Bounce Back Loan?


If you wish to close your company owing a Bounce Back Loan, you have two options:

Can I use a Bounce Back Loan to Pay Off Debt?

Should your trading limited company be considered insolvent? Statutes require directors of the company not to prioritise creditors. To do so is especially guaranteed by the director risks being accused of wrongful trading. This may open, then the director remains personally responsible for the debts of the company.

Please do not hesitate to contact HBG Advisory for further explanation.

Unable to repay a Bounce Back and require robust professional advice?

Our licensed insolvency experts can offer you free and confidential advice now via live chat, phone or e-mail. Let us explain your options and possible routes out of debt.

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