Repaying bounce back loans
Bounce back loans were introduced to help businesses cope with the effects of COVID-19. They represent a valuable lifeline for a number of small and medium-sized enterprises, particularly those that are failing to generate the sort of revenue anticipated during coronavirus-free times.
Nevertheless, bounce back loans are loans like any others – if they’re not repaid, the usual debt-recovery measures will be enforced, which could involve the participation of the County Court. Ultimately, if you take out a business bounce back loan, your company will be held fully liable for its repayment.
That said, scenarios exist whereby it is possible to walk away debt-free.
Insolvency
In the event of insolvency, all business debt will be written off, including any remaining bounce back loan repayments.
Liquidation
In the event of liquidation, directors of limited companies won’t need to worry about their personal finances being affected by business debt.
As long as there is no evidence of business wrongdoing and it’s determined that a bounce-back loan was taken out for legitimate business purposes, you will have the option to liquidate your company while remaining debt-free.
In the event of liquidation, the lender is covered for any potential losses by the government, specifically HMRC. In respect of any perceived business malfeasance, it is uncertain at the time of writing what measures HMRC will take.
Though the Bounce Back Loan Scheme BBLS requires no personal security, a company liquidation or insolvency on your record may restrict your ability to borrow money in the future.
For more information on company liquidation, please refer to the following JR Accounts web pages: https://www.jraccounts.co.uk/index.php/component/newsfeed/?command=viewitem&id=21206 and https://jraccounts.co.uk/?option=com_newsfeed&command=viewitem&id=20754.
Can the BBLS be used to pay off debt?
In the event of insolvency, directors are statutorily prevented from prioritising one creditor over another. Electing to repay a debt that has, for instance, been secured with personal assets could be construed as business malpractice
Need help with your business’s finances? Here at JR Accounts, we provide a range of business accountancy services, from payroll, business planning, company secretarial and much more. Talk to our Ilford accountants today and arrange a free consultation.
