As a means of providing assistance to small and medium-sized businesses that were facing difficulties as a result of the COVID pandemic, the Bounce Back Loan Scheme was implemented. Unfortunately, a lot of companies have not recovered from the pandemic, and as a result, they have found themselves in the situation where they are unable to repay their bounce-back loan.
What do you mean by “Bounce Back Loan Scheme”?
The Bounce Back Loan Scheme (BBLS) has made it possible for small and medium-sized companies to borrow between £2,000 and £50,000 for a period of up to six years, (extended to 10 years) with repayments starting one year after the loan was granted.
The total amount that was accessible was determined by the gross revenue of the company. A company was permitted to claim a maximum of 25% of its annual revenue, up to a maximum loan amount of £50,000.
During the first year of the loan, there was no interest charged, and the interest rate that was charged for the remaining time was quite low. Because this economic benefit was guaranteed by the government of the UK, neither the company nor the directors were obliged to require any collateral from the lending bank before the loan was approved, making it an attractive option for many businesses affected by the coronavirus pandemic.
Are there any Bounce Back Loans that are still available?
There is no longer a possibility to get a Bounce Back Loan because the program ended on March 31, 2021, and new loan applications were no longer accepted.
Figures provided by the government show that more than 1.5 million applications for the Bounce Back Loan Scheme were authorised either at the start of the COVID-19 pandemic or during the pandemic itself, with the total value of the facilities that were approved reaching £47 billion. Under the BBLS, small and medium-sized companies were eligible to get loans ranging from £2,000 to £50,000.
It has been predicted by the Department of Business, Energy, and Industrial Strategy (BEIS) that there could be defaults on the bounce back loans amounting to as much as £27.9 billion. This corresponds to more than 900,000 loans that have defaulted at some point.
What are the Loan Repayment Terms for a Bounce Back Loan?
Repayments on the loans start one year after the company has received the loan, and the terms of the loans span from 6 to 10 years, accordingly.
When Can the Government Write Off Bounce Back Loans?
Bounce Back Loans were guaranteed by the government; however, this doesn’t mean that the loan will be written off completely if a company is unable to repay a Bounce Back Loan. It would only be written off if the company in question were to be liquidated or dissolved.
What will happen if the Company is unable to Pay Back the Outstanding Bounce Back Loan?
We have included a few instances of the next steps that you can take if your company is unable to repay your bounce-back loan.
Speak with your lender to discuss your options
If you find yourself in a situation where you are unable to keep up with repayments on your bounce back loan, the first thing that you should do is speak with your lender to discuss the difficulties you are facing and all of the options to repay the loan that are available for you to consider.
Enquire whether you can reduce your monthly Bounce Back Loan repayment amount
The lender may be able to offer you a six-month decrease in loan instalments. This means that just the loan’s interest will be repaid throughout that time period. The lender could also agree to a six-month repayment break. This could provide you with a buffer from cash flow difficulties, as well as the chance to re-evaluate issues such as customer payment terms, supplier payment terms, or cost savings that might be possible.
Negotiate flexible repayment terms with HMRC and other creditors
Companies might want to look into solutions that enable them to manage their liabilities in a sustainable manner and on an ongoing basis, such as taking a repayment holiday to ensure long-term success. The first thing that is usually done is to determine the overall obligations of the company, the specific individuals to whom those liabilities are owed, and the terms of repayment for each individual responsibility. The next step is to develop a strategy that will determine whether or not the company has sufficient money to cover all of its obligations when they become due.
Develop a cash flow forecast to gain control of your financial flow
You need to make sure that you have a comprehensive understanding of how and when cash comes in and out of the company, as well as the amount of income that is required on a monthly basis to guarantee that everything runs smoothly. The development of cash flow forecasts can be of assistance in this case. It may be a chance to evaluate whether there are areas in which cost savings can be achieved, whether there are cases in which less stock can be carried, whether there are instances in which customers pay on time or whether they are followed up on in a systematic manner if they do not pay on time, and whether there are times when less stock can be carried.
As a result of these forecasts, the company may have the option to negotiate with its suppliers to settle its bills at a point throughout the month when it has a lot of cash on hand, rather than incurring more credit or an overdraft.
Consult an Insolvency Practitioner & potentially wind up the company
Directors of limited companies are required to seek the assistance of an insolvency practitioner if they decide that a company can’t afford to pay its obligations as they fall due. It’s possible that the insolvency practitioner will be able to review the financial records of the company and offer a few options for how to get out of the current situation. However, if this is not the case, they can provide the company directors with guidance regarding the actions that must be taken to legally wind up the company.
Because of the vast number of Bounce Back Loans that have been made available, some companies will inevitably be unable to keep up with their repayments, even though they have made sincere efforts to restructure the loan. When company directors become aware that the company is unable to continue making BBLS repayments, they must seek advice as soon as possible.
In what ways can the McLaren Insolvency Practitioners be of assistance?
In cases in which a company is experiencing financial difficulties and is having difficulty meeting its obligations, McLaren Insolvency Practitioners offers experienced support that is kept confidential to assist the company in navigating these challenges. McLaren, which has its headquarters in Glasgow and Regulated by the Institute of Chartered Accountants of Scotland (ICAS) works closely with companies in a wide range of industries to offer them solutions that are both practical and effective during challenging times.
To assist business owners and directors, including sole traders, in understanding their present financial situation and taking the right actions, their services with managing monthly repayments. These include the following:
- Creditors’ Voluntary Liquidation (CVL): If the company is no longer viable, McLaren may assist you in walking through the official process of voluntarily winding up the Company.
- Company Voluntary Arrangements (CVA): If your company can recover, a CVA may enable you to continue trading while renegotiating the conditions of your repayment with your creditors, including potential adjustments to your loan term.
- HMRC and VAT debt advice: McLaren can aid in the management of tax-related debts by designing a structured repayment plan and engaging with HMRC on your behalf.
- Organised business rescue and recovery: If there is a possibility of saving the company, McLaren will assist you in investigating various solutions for turning things around and restoring the stability of your cash flow.
They also provide a free, no-obligation consultation, allowing company directors to consider their choices and seek professional guidance before taking any official steps.
Whether your company is facing short-term cash flow challenges or long-term financial pressure, McLaren Insolvency Practitioners can give the guidance and support you need to make confident decisions.
