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I Cannot Afford to Repay My Bounce Back Loan

The Bounce Back Loan Scheme (BBLS) was introduced by the government as a lifeline for small businesses impacted by the financial challenges of the COVID-19 pandemic.

These loans provided a much-needed injection of capital to help businesses survive and navigate through uncertain times.

However, for some borrowers, the reality of repayment has become overwhelming, and they find themselves unable to meet their financial obligations.

If you are among the individuals who find themselves in this situation, feeling the weight of an unaffordable Bounce Back Loan repayment, you are not alone.

This article aims to address the concerns and challenges faced by borrowers who are struggling with loan repayment and explore the available options and potential solutions.

In this article, we will delve into the various options and potential solutions for those who cannot afford to repay their Bounce Back Loans.

We will explore the importance of communication with your lender, understanding the repayment terms, and seeking financial assistance and advice.

We will also discuss the possibility of loan restructuring, refinancing, or exploring alternative repayment arrangements that may be available to borrowers.

Understanding Bounce Back Loan Repayment Challenges

The Bounce Back Loan Scheme was introduced by the UK government to provide financial support for limited companies during the unprecedented business interruption caused by the pandemic.

These fully government-backed loans of up to £50,000 do not require personal guarantees, and no payments are necessary for the first 12 months.

However, many businesses are now facing challenges with loan repayments. The primary issue is that the trade for some businesses has not yet returned to pre-pandemic levels, making it difficult to meet their monthly repayment obligations.

Failing to repay these bounce back loans can have serious consequences, including legal action, a negative impact on one’s credit score, and potentially insolvency.

If you find yourself unable to repay your bounce back loan, it’s important to act quickly. Contact the lender as soon as possible to discuss repayment options available.

Contacting your lender is one of the initial steps. Explain your current situation to them and take it from there. They could potentially offer a repayment plan that meets your individual needs, such as reduced payments or even a temporary break from payments.

This could give you some much needed breathing room financially. Additionally, seeking the assistance of a financial advisor or a serious debt collection charity may prove helpful.

Reducing Monthly Payments with Pay As You Grow Scheme

One significant relief for struggling businesses is the Pay As You Grow (PAYG) scheme. This scheme offers three options to reduce monthly financial burden for those who cannot afford to repay their Bounce Back Loan: deferment of payments for 6 months, extension of the loan term to 10 years, or interest-only payments for a first year payment holiday of 6 months.

Delaying repayments for up to six months under the PAYG scheme can provide a much-needed reprieve from the monthly financial burden, allowing businesses to focus on improving their cash flow.

Extending the loan term from six years to ten years can reduce the monthly repayment amount by half, making it more manageable for many businesses.

Lastly, opting for interest-only payments for six months can significantly reduce the monthly repayment amount during that period.

These options can help businesses navigate through tough times and prevent defaulting on their bounce back loans.

Consequences of Defaulting on a Bounce Back Loan

It is crucial to understand the potential consequences of defaulting on a bounce back loan. In the event of a company being unable to repay the loan, lenders must adhere to “appropriate recovery processes,” which include the use of the Court if necessary.

Lenders must provide a 12-month period to pursue the outstanding amounts after issuing a formal demand to the borrower. This is underlined by the terms of the BBLS.

If a company becomes insolvent and undergoes liquidation, a licensed insolvency practitioner is appointed to administer the process.

This formal process involves identifying the company’s assets, selling them to benefit creditors and business debts, and distributing the proceeds according to legal precedence.

Importantly, a company director will not be held personally liable for repaying a bounce back loan if the company becomes insolvent, provided the loan was utilised appropriately and not secured with a personal guarantee of company assets.

Restructuring Options for Limited Companies with a Bounce Back Loan

There are various debt restructuring and refinancing options available to companies experiencing difficulty with Bounce Back Loan repayments. One option is negotiating with creditors to determine the terms of repayment acceptable to both parties.

Time to Pay arrangement is an effective way to handle debt. It is a flexible and informal payment plan which allows businesses and individuals to spread their payments over an agreed period to HMRC.

However, if any payment is missed or the terms of the agreement are broken, the debtor will be personally liable.

A more formal alternative is the Company Voluntary Arrangement (CVA), an insolvency procedure for insolvent companies unable to repay a Bounce Back Loan.

An insolvency practitioner will act as Supervisor of the arrangement, ensuring that the company and its creditors comply with the terms of the arrangement.

Ultimately, the choice of restructuring options will depend on the company’s specific circumstances and the severity of its financial difficulties.

Closing Your Business with an Outstanding Bounce Back Loan

Closing a business with an outstanding bounce back loan can be a complex process. Any outstanding debt will be written off, as these loans do not require a personal guarantee.

The government has been instructing banks to stand against any strike-off application when there is a Bounce Back Loan remaining.

They are strongly encouraging businesses to prioritise loan payments for the betterment and sustenance of their organisation. Legislation is being introduced to allow The Insolvency Service to investigate company directors.

This applies in cases several loans where the director’s company has an outstanding bounce back loan and borrowing company is subsequently struck off.

A Creditors’ Voluntary Liquidation (CVL) is a formal insolvency procedure that can be used to achieve the voluntary liquidation of an insolvent company.

The primary benefit of CVL is that it grants directors more authority over the procedure than compulsory liquidation does. Directors can maintain trading operations of the company during CVL, which is not an option in compulsory liquidation.

However, the primary drawback of CVL is that it is more costly than other insolvency processes, such as administration.

Personal Liability and Misuse of Bounce Back Loans

While Bounce Back Loans do not require personal guarantees, misuse of the loan funds can result in personal liability. Misuse entails utilising the loan for personal use rather than for the purpose of providing an economic benefit for limited company director the other business owner.

The bank won’t ask the company director to repay any money owed on the Bounce Back Loan if it cannot be paid back. Instead, it will be up to the government to cover the bill.

However, while the company is still operational and registered with Companies House, the company director remains accountable for repaying additional interest on the bounce back loan.

Seeking Professional Advice for Bounce Back Loan Repayment Issues

Seeking professional advice is highly recommended for those facing repayment issues with their bounce back loan. Financial advisors, accountants, or debt advisors can provide guidance on the various options available to help manage the situation and prevent defaulting on the loan.

They can assist in arranging a repayment plan that meets your requirements, such as lower payments or a temporary pause in repayments.

Professional advice can also provide clarity on the repayment process and help you understand the consequences of failing to repay a bounce back loan. This could include legal action, a detrimental credit score, and potential personal liability.

With the right guidance and support, you can navigate through the challenges of Bounce Back Loan repayments and make the best decisions for your business.

Frequently Asked Questions

What happens if you can t afford to pay back bounce back loan?

If you are unable to pay back a bounce back loan, it is advisable to talk to the lender as soon as possible to agree on an appropriate repayment and payment plan together. They may be willing to negotiate a payment holiday, reduced payments or extended repayment period.

This credit rating will help ensure the loan does not default and have adverse effects on your credit score.

Can bounce back loan be written off?

Unfortunately, as the loan is backed by the Government guarantee, there is no legal right to write off a bounce back loan. Therefore, writing it off may not be possible without reaching an agreement with creditors.

What happens if you can t pay your bounce back loan sole trader?

If you cannot pay back the bounce back loan, it will have to be repaid in full by 4 May 2023.

If you are unable to pay the loan, it will need to be paid from your personal assets, or you may have to consider other debt management options.


In conclusion, the repayment of bounce-back loans presents a significant challenge for many businesses. However, a range of solutions and strategies can be employed to manage this financial burden.

The Pay As You Grow scheme offers flexibility in reducing monthly payments, while various restructuring options can provide relief to struggling companies.

It is crucial to understand the consequences of defaulting on a Bounce Back Loan and the potential personal bankruptcy liability that may arise from misuse of funds.

Seeking professional advice is an essential step when facing repayment issues, as it can provide guidance on the most suitable options for your business.

By being proactive and exploring the available solutions, you can navigate through these challenging times and ensure a brighter future for your business.

Remember, you are not alone in this journey. Many businesses are in the same situation, and with the right support and guidance, we can all bounce back from this unprecedented challenge.

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