Can a Bounce Back Loan Be Written Off?

Companies are not permitted to write off a Bounce Back Loan (BBL).

If you’re able to repay but the current instalments are impacting your cash flow, you can discuss extending the repayment term from 6 to 10 years through the Pay As You Grow (PAYG) scheme with your lender.

Bounce Back Loans have played a vital role in providing financial support to businesses during challenging times.

Loan forgiveness or write-off is a topic of significant interest, particularly for businesses facing financial difficulties or struggling to repay their loans.

Understanding Bounce Back Loans

Bounce Back Loans were introduced by the UK government as a means to support small businesses affected by the COVID-19 pandemic.

These loans, with a maximum amount of £50,000, came with attractive features, such as low interest rates, a one-year deferral of repayments, and no requirement for personal guarantees.

To apply, business owners simply had to attest that their business had been negatively impacted by COVID-19.

However, as the pandemic continues to affect the economy, numerous businesses are struggling to make their loan repayments.

Repayment Terms and Options

Bounce Back Loans come with a repayment term of six years, with low fixed interest rate and only payments and borrowers can request an extension of their loan term to 10 years at the same interest rate remaining fixed with interest only payments rate. Additionally, there are no extra fees for early repayment charges.

To further support businesses, the government introduced the Pay As You Grow (PAYG) loan scheme, aimed at providing more flexible repayment options for borrowers.

PAYG Scheme

The PAYG scheme offers a range of choices for Bounce Back Loan borrowers to help them resume regular trading. Borrowers can extend their loan term from six to 10 years, reduce their monthly payments for up to six months, make monthly repayment, or take a repayment holiday for up to six months.

However, it’s important to note that companies are still liable for the monthly repayment amount of their Bounce Back Loans, even if they opt for the PAYG scheme.

Writing Off a Bounce Back Loan: Is it Possible?

Bounce Back Loans can only be written off through insolvent liquidation. This process is usually used when a company cannot pay its debts.

If a company initiates formal insolvency proceedings, the loan becomes eligible for write-off. In such cases, liquidation may be a potential course of action to consider.

However, if a business is unable to make monthly repayments on their Bounce Back Loan, insolvency practitioners will review the business’s declarations to repay your bounce back from creditors and the appointed liquidator will evaluate their decisions carefully.

Writing off a bounce back loan without going through a formal insolvency process is not possible.

Companies that fail to repay their government backed loans will find themselves facing the consequences, which may include further financial difficulties and potential personal liabilities for company directors.

However, there are options available for businesses struggling to make their repayments. Engaging with insolvency practitioners can provide guidance and support to help navigate these difficult financial situations.

Liquidation and Bounce Back Loans

Liquidation is the only way to write off a Bounce Back Loan without personal guarantees. In the event of liquidation, any debt that remains unpaid – unless secured by a personal guarantee – will be cancelled.

The company must close its operations subsequently enters liquidation. This process requires the administrations of the company write a licensed insolvency practitioner who will initiate the formal liquidation process.

In insolvency proceedings, payments are made to creditors after the costs and expenses of the Liquidation have been covered.

If a company enters into an insolvent liquidation process, the the government’s guarantee of guarantee on the bounce back loan will be triggered for any remaining balance, and banks will seek repayment from the UK government rather than the company directors.

While liquidation provides an option for companies unable to make monthly repayments lower their bounce back loans, it is essential to consult with a licensed insolvency practitioner to ensure the appropriate process is followed and minimise the potential consequences for company directors.

Company Dissolution and Outstanding Bounce Back Loans

Company dissolution is not an appropriate solution for a business with an outstanding bounce back loan.

Instead, the company must undergo an insolvent liquidation process, with a government guarantee on the Bounce Back Loan triggered for any remaining balance. A licensed insolvency practitioner should be appointed to carry out this process.

Attempting to dissolve a company with an outstanding bounce back loan without going through the proper liquidation process can lead to further complications and potential personal liabilities for company directors.

It is essential to seek the guidance of a licensed insolvency practitioner to navigate this complex situation.

Avoiding Personal Liability for Bounce Back Loans

As a director of a limited company, you may be personally liable for making payments on a bounce back loan if you fail to fulfill your director’s duties and do not comply with the regulations regarding loan utilisation.

Company directors may be held personally liable for the loan post-liquidation if their company closed business incorrectly declared the cause of their adverse impact during the Bounce Back Loan application process.

To avoid personal liability for a bounce back loan, directors must fulfill their duties and adhere to the rules regarding the loan’s usage.

Additionally, insolvency practitioners are required to investigate Bounce Back Loan fraud as part of their appointment, further emphasising the importance of adhering to the regulations surrounding these loans.

Navigating Financial Difficulties with a Bounce Back Loan

If your business is struggling to manage Bounce Back Loan repayments and financial difficulties, it is essential to seek guidance and support from insolvency practitioners.

They can provide advice on the most effective methods for addressing financial difficulties related to a bounce back loan.

When facing financial difficulties associated with a bounce back loan, it is advised to reach out to the lender and attempt to negotiate a repayment plan or investigate the possibility of reduced payments.

If you are a company director facing financial difficulty or in repaying your bounce back loan, there is assistance available. Contact the team at HBG advisory to discuss the options available to limited company.

Facing financial difficulties can be daunting, but seeking guidance from insolvency practitioners and being proactive in managing your bounce back loan repayments can help alleviate some of the stress and uncertainty.

Frequently Asked Questions

Are bounce back loans likely to be written off?

Bounce back loans are unlikely to be written off. In the case of insolvency it is possible can a bounce back loan be written off, but you would need to seek professional advice on the best options available in order to discuss the options for your business.

It is important to remember that the decision to write off a loan is not taken lightly and is only done in extreme circumstances. Therefore, it is.

What happens if I can’t pay back my BBL?

If you’re unable to pay back your BBL, the bank may take measures such as sending a letter or escalating towards debt collection and court action in some cases.

It is important to reach out to your lender to discuss potential repayment options if you are having trouble with your business loan.

Will bounce back loans be written off sole trader?

Given that the loan term of the Bounce Back Loan Scheme is a government backed loan, it is possible for self employed individuals to write off debt incurred from this loan more than just the interest amount.

However, the individual must enter a formal insolvency process in order outstanding creditors to do so.

Can you close a company down with bounce back loan outstanding?

It is possible to close a former company’s debt problems with an outstanding and write off a bounce back loan.

This can be done through a liquidation process, where the assets of the former company closed down are sold off and used to pay and write off a bounce back the outstanding debts, including the write off a bounce back loan.

This is an option worth exploring if you are looking to terminate your business with an outstanding bounce back loan.

Summary

In conclusion, Bounce Back Loans have provided much-needed support to businesses during the COVID-19 pandemic. However, many companies are now facing difficulties in repaying these loans.

Writing off a bounce back loan is only possible through insolvent liquidation, and company dissolution is not an appropriate solution for struggling businesses, with outstanding loans.

Navigating financial difficulties with a bounce back loan can be challenging, but seeking guidance from insolvency practitioners and understanding your repayment options can help you make informed decisions and protect your business’s future.

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