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What happens if the business can’t pay back your Bounce Back Loan?

What happens if a business can’t pay back its Bounce Back Loan? Written by John A Waller, Director. Reviewed May 19th,2022.

The main advantages of the bounce back loan were that the government provided 100% security for the money they lent. Therefore, no personal guarantee by the borrower was required to secure the loan. Instead, if the company cannot repay the money owed on the bounce back loan, the bank will turn to the government to repay it, not the company’s director himself.

Will I personally be liable?


Individuals operating limited companies remain protected from the company’s debts. As a pre-condition of the loan, borrowers provide no guarantees.

However, this does not apply if any corporate misfeasance or wrongful trading is evident.

So if none of the above exists, the company’s directors remain secure from debt and can start a new business.

The UK Government is coming to terms with the fact that over half of Bounce Back Loans may remain unpaid. According to the National Audit Office, £26bn of the £45bn Bounce Back Loans issued so far will never be paid off.

On October 7th 2020, the national audit office published a report, ‘Investigation into the Bounce Back Loan Scheme‘. The report covered an investigation into the UK Government’s Bounce Back Loan Scheme, which began May 4th 2020. The report describes the Scheme:

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Credit Risk and Bounce Back Loans (BBL)

When the scheme was set up, low-level credit and customer checks were carried out, resulting in the potential risk that companies could not repay their BBLs, which then affects taxpayers.

Bounce Back Loans and the Risk of Fraud

The UK Government acknowledges that, despite the best efforts of lenders, the provision of funds hastily exposed UK taxpayers to potential significant fraud risks on a scale that has not been seen before.

The report, through the Business Banking Resolution Service, highlighted that 40 per cent of companies or more have no intention of repaying them back

Mainly due to because:

  • Borrowers do not expect repaying their Bounce Back Loan; 
  • Borrowers believe the Government will not undertake to collect the unpaid debt.

So the UK Government faces a quandary. Should it write off the entire £46 billion loan? However, such measures would potentially save £1bn in the costs of Business Interruption Payment (BIP).

Duties of an Insolvency Practitioner and Bounce Back Loans

Once appointed, licensed insolvency practitioners remain required to investigate the company’s position before it enters the insolvency procedure. For example, should any evidence arise of company directors or shadow directors? Making fraudulent claims, and were aware of the company being insolvent. The liquidator then must report this to HMRC.

What happens if a business can’t pay back your Bounce Back Loan, and lenders chase money owed?

Meanwhile, lenders remain ready to scrap plans to create an independent agency to pursue bad Bounce Back Loan debts and handle overdue payments themselves.

Technically, no backlashes exist should you default on your Bounce Back Loan. However, please note that with a bounce-back loan. Individuals do not secure loans. Only the UK government provides 100% backing once lenders have exhausted avenues to collect payment.

Your assets are not at risk. No lender was allowed to accept any personal guarantee or register a charge over individuals’ assets.

Bounce Back Loans also have no impact on your credit score.

Nevertheless, lenders will chase repayment as and when due in their usual manner, like eventually appointing debt collection agencies, sending threatening collection letters, and even court action followed by bailiffs. However, they have no guarantee of you legally.

Therefore, if faced with this situation, act swiftly and contact the team at HBG Advisory.

The Lenders may instruct debt collectors to recover unpaid Bounce Back Loans.

What happens if business can’t pay back your Bounce Back Loan, and I have used my loan to repay debt?

A company director managing an insolvent company has no capacity in law. Pay creditors in preference to others, unless the debt secured. To do so, especially as a creditor, you have a personal guarantee that exposes you to wrongful trading as a director, which remains a civil offence, further challenging your exposure to financial responsibility for your limited company debt. Therefore, removing the limited corporate veil,

Along with the lenders, the Government has discussed establishing a debt collection panel governed nationally by a code of practice. Due to lenders only being able to claim the Government’s 100-per-cent guarantee once they have exhausted all options.

Nowadays, since the last financial crisis in 2008 in the UK. Banks want to remain clear of bad news. As such, issues with Bounce Back Loans fall into the bad news arena. The British Bank perhaps has more to say in the future as the pandemic extends.

What happens if a business can’t pay back your Bounce Back Loan? Can I liquidate my Limited Company?


To liquidate a limited company using a creditors voluntary liquidation for an insolvent company requires a licensed insolvency practitioner, as found in the team at HBG Advisory.

All the proven company creditors, including the lender who provided the bounce back loan, will rank for payment once the liquidator has realised all company assets and collected all monies owed to the company, enabling a distribution.

Finally, caution required when attempting to abuse the system wrongly. 

However, your ability to borrow money in the future may be affected, as with any default, remains recorded on your credit record. In addition, lenders signal they may not lend to an individual who has failed to pay back a bounce back loan. 

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