What to Do If You Missed a Repayment On Your Bounce Back Loan
The Bounce Back Loan scheme was introduced in 2020 as a result of the COVID-19 outbreak. Businesses that were losing revenue were able to quickly secure up to £50,000 to stay afloat during hard times. Unfortunately, some businesses are still struggling to regain business post-COVID and are now finding themselves in a position where they cannot make payments on their Bounce Back Loan. In this article, the insolvency experts at Restart BTI discuss what happens if you can’t back your Bounce Back Loan, and the various solutions available to your business.
So, what do you do if you’ve missed a repayment on your Bounce Back Loan? Missing loan payments can trigger serious, long-term financial troubles, including insolvency. Consult a licenced insolvency practitioner as soon as possible to discuss your options. They will be able to advise you on the best course of action to limit the damages to your business moving forwards.
Read on to learn more about how to handle Bounce Back Loan repayments, missed payments and defaulting.
What to Do if You Can’t Pay Bounce Back Loan Repayments?
If you find yourself in a situation where you cannot pay your Bounce Back Loan repayments, you must ask yourself if your company is insolvent. This means that you cannot afford to pay back debts within a reasonable period.
If this is the case, your business will need to cease trading. Typically, voluntary liquidation is the best option here as this tends to reduce the chances of an in-depth assessment of whether you should have received Bounce Back loan funding in the first place.
However, if your financial problems are short-term, you may be able to negotiate a payment holiday or reduced payments with your bank. This is not always possible, though, as banks have a Government guarantee with this type of loan and may not be as flexible as a result.
How Does Missing Bounce Back Loan Repayments Impact Your Business?
Defaulting on your Bounce Back Loan can be indicative of wider financial problems within your business. Issues such as cash flow problems and being unable to pay back loans can quickly escalate.
No personal guarantees have to be provided to secure a Bounce Back Loan unless you are a sole trader, therefore you’re not at risk of losing property or other assets. If you are unable to pay off the loan, your lender has the option to write off the debt and claim on the Government’s guarantee. However, in order to do this, your company must be declared insolvent.
However, if you are simply behind on payments but believe that your company can overcome its financial troubles, a licensed insolvency practitioner like Restart BTI can help you to explore your options. This will allow you to continue trading and arrange payments in a way that works for everyone involved.
Bounce Back Loan Repayment Solutions
If you declare your business insolvent, it is a good idea to work with a licensed insolvency practitioner to assess your options and legal responsibilities. Such options in cases of missed Bounce Back Loan repayments include:
Company Voluntary Arrangement (CVA)
If you have a generally profitable business but are insolvent, it may be a good idea to ask creditors to agree to a Company Voluntary Arrangement. This is a legally binding agreement that enables repayments in part or in full, typically over 3-5 years. The business can continue trading during this time.
For partnerships, a Partnership Voluntary Arrangement would be equivalent.
Administration
Administration in an insolvency procedure that provides a company with immediate protection from creditors. It must, however, achieve one of the following purposes:
- Rescue the company (likely with the use of a CVA).
- Release assets and distribute to relevant creditors.
- Secure a more advantageous outcome than liquidation.
Creditors Voluntary Liquidation (CVL)
If your business is in a position where it is unable to pay off its debts and can no longer make a profit, a CVL may be the best option. This method of insolvency formally closes the business and tends to be a last resort.
Insolvency Solutions at Restart BTI
If you’re struggling with your Bounce Back Loan repayments or have defaulted on the loan, get in touch with the insolvency experts at Restart BTI today. We’re here to walk you through your options and help you gain the best possible outcome. We work with you to Reassess, Restructure and Restart your business.
Get in touch with one of our experts today
Established in 2018, the directors at Restart BTi have over 50 years of experience to assist companies, business owners and individuals with expert advice and tailored solutions when facing financial difficulties.
