What is a Bounceback Loan, and How Do You Get One?

The Government offered a bounceback loan during the overdrawn directors’ loan accounts during the Coronavirus pandemic. These loans were intended to assist small businesses in obtaining fast, ’emergency finance’. The loans could be borrowed by companies between PS2,000 to PS50,000. These loans could be used to pay staff wages and directors. The loans could be used to pay rent and business rates, monthly business costs, overheads like phone and electricity bills, and for business expenses such as business and monthly business expenses. The Government guaranteed lenders a 100% guarantee and could get interest-free loans for the first 12 months.

Lenders of these loans could not request personal guarantees to protect directors from being held personally responsible in the event of default. This protects the director’s personal finances. You won’t be held accountable if you cannot pay the loan repayments. 

What if we are unable to repay our bounceback loan?

Although we don’t expect this to happen, we do know that these loans have been taken out by many financially unsound companies. It is possible that your bank credit rating could be negatively affected if the bounceback loan is not paid back. If you cannot pay your obligations, you may become insolvent. Loans could be taken out by sole traders. 

How can we tell if I’ve misused Bounce Back Loan funds

Bounce Back Loans were created to help as many companies as possible when they first launched. Because every company faced its own challenges, the rules stated that the loan had to be used to bring economic benefits to the company.

This could have been used by some to increase working capital, purchase machinery, stock or equipment, or for modifications to the business’s changing environment to help it adapt or supplement its staff wages. The Bounce Back Loan had to be used in the company; it was not for personal use. If the company cannot repay them, those found guilty of using their Bounce Back Loan may be personally liable.

If you have doubts about whether your Bounce Back Loan was misused, it is a good idea to seek professional advice and help. UK Liquidators has over 100 highly qualified and experienced licensed insolvency professionals who can assess your company’s situation and help you to understand your options.

What happens if we can’t pay my Bounce Back Loan on time?

The PAYG scheme offers flexibility that will allow some companies to repay their Bounce Back Loans. Sometimes, the Bounce Back Loan may be just one of many loans or finance agreements that the company has. Repaying them all would be too much. What happens if your company cannot pay the Bounce Back Loan? Can you be held responsible for this debt personally? The Bounce Back Loan provided 100% security to the banks for any money they borrowed. This meant that the Governmentnt provided 100% security for the money they lent. 

This security should give some comfort to company directors. However, the government guarantee will not be effective if the company declares bankruptcy. Your company can still trade and be listed on Companies House as an active company, but you must repay the Bounce Back loan.

Can we close my business using a Bounceback Loan?

There are two options for liquidating an insolvent business. Directors can also initiate liquidation. Creditors’ Voluntary Liquidation is the method used. This includes identifying the company assets and then selling them to creditors. Finally, the proceeds will be distributed according to a hierarchy. The liquidation will result in the company being dissolved.

Can bounceback loans be repaid?

Bounceback loans were a loan to the company and not to you, the shareholder. If the company is placed into liquidation, administration, or bankruptcy, the loan will be written off, and the company ceases existence. These cases would be written off by private lenders who are Bounce Back lenders. They will then claim their 100 per cent guarantees.

Conclusion

Bounce Back Loans were created to help as many companies as possible when they first launched. Because every company faced its own challenges, the rules stated that the loan had to be used to bring economic benefits to the company.