My company cannot repay a Bounce Back Loan

Bounce Back Loans (“BBL’s”) became available in March 2020, when the UK first entered into a national lockdown as a result of Covid-19.  No repayments were required during the first 12 months, and borrowers were subsequently given the option to delay repayments for a further six months.

But now, as time has lapsed, thousands of SME’s will be starting to repay these loans.  If your business took a BBL but has continued to struggle, it could be the case that repayments cannot be met.  If your company cannot repay its BBL you will need to consider where you stand, and what the available options are. 

What happens if my company cannot pay its debts?

If your company is unable to pay what it owes, as it falls due, it is legally insolvent.  It may be possible for the business to recover, but if this is not possible, you should seek advice from a Licenced Insolvency Practitioner.

Where a company is insolvent, the interests of its creditors become paramount and a director must then take steps to ensure assets are preserved, and the position to company creditors does not worsen. 

What are the options if my company cannot repay a bounce back loan?

Option 1 – The Pay As You Grow (PAYG) BBL Scheme

PAYG was announced back in February 2021 and allows businesses to apply for adjustments to their BBL repayments in three ways:

• An extension of the loan term from 6 years to 10 years, retaining the fixed rate of 2.5%
• A single repayment break of up to six months
• Repaying interest only on the loan for up to 6 months, up to 3 times during the term

If you have explored these options, and still believe that your company will be unable to repay its BBL, then you need to consider other solutions and perhaps speak to a licensed insolvency practitioner.

Option 2 – Company Rescue

If the business is viable then it may be rescued either via a Company Voluntary Arrangement (CVA) or Administration.

A CVA is a legally binding agreement between a company and its creditors, in which creditors are paid all or part of the debt over an agreed period of time.  Subject to approval, a CVA will allow the company to continue trading, whilst making affordable payments.  An insolvency practitioner is appointed to supervise the CVA, ensuring the company adheres to all of the terms of the agreement.

Administration is an option which can rescue a company but is more likely to save the core business and provide continuity to certain stakeholders.  Again, an insolvency practitioner is appointed to manage the company’s affairs.  The process can allow the company to continue trading (in administration), could result in a sale of the business and assets.

Option 3 – Company Closure

In many cases you will need to consider whether the company should be wound-up (formally closed). Voluntary liquidation is an insolvency process formally known as Creditors Voluntary Liquidation (CVL) and is appropriate where a business has no viable future and must cease trading.

Although it is a last resort, the procedure can be instigated by the directors of an insolvent company, if the shareholders’ of the company agree that the business should cease trading.  Once it is resolved that the company should enter CVL, a Liquidator will be appointed by the shareholders and creditors, and company assets will be sold in order to repay its liabilities. 

Can Insolvency Practitioners at Keywood Group help?

Careful consideration must always be given to all options available.  Keywood Group is a Licenced Insolvency Practice with offices in Birmingham and London. Our team has extensive experience in advising business on their options, and dealing with the various options mentioned above.  Our friendly team will work with you to assess the options available and provide transparent advice about the implications of each option. 

If you want further information, please contact us for a no obligation chat.