Bounce Back Loan Help

The Bounce Back Loan Scheme was launched in May 2020, following feedback from businesses that the Coronavirus Business Interruption Loan Scheme (CBILS) made it difficult for smaller businesses to access finance.

Bounce Back Loans provided small businesses with fast access to funds between £2,000 and £50,000 - capped at of 25% of their turnover. Businesses did not have to make any repayments for the first 12 months of their loan.

There were no detailed rules for how a Bounce Back Loan could be spent, but there were broad guidelines that it should be used for the ‘economic benefit’ of the business and should not be used for personal gain.

Common legitimate uses of the loan included paying company bills, purchasing stock or supplies, and paying staff wages.

The initial term of the loan was 6 years. The first 12 months were interest free (with no payments due), with interest rates of 2.5% per year applicable after.

Although the loans were 100% backed by the Government, it was made clear that businesses would be responsible for repaying any amount borrowed, plus any interest due.

If you're struggling to make your Bounce Back Loan repayments due to financial difficulties, you may be eligible for a repayment holiday or extension. The Pay As You Grow (PAYG) Scheme is available to those who took our the Bounce Back Loan, allowing them to:

• Extend the loan term from 6 years to 10 years at the same interest rate of 2.5%
• Paying interest only for 6 months (available up to 3 times during the loan term)
• Take a payment holiday for six months (available once during the loan term)

If you haven't yet used your PAYG options, we recommend contacting your bank to explore these possibilities. However, if you're unsure about how these options may impact your business or you have already exhausted your PAYG options, speak to our team today. We can provide guidance on alternative solutions that may better suit your circumstances.

The Bounce Back Loan is an unsecured debt. Unsecured debts in the liquidation process are generally written off, unless there are personal implications due to Bounce Back Loan fraud or misuse.

It’s important to understand the rules and restrictions of the loan. You should have only used the funds for legitimate business expenses such as paying wages, rent, and other overheads.

Keep accurate records and receipts of all loan expenditures to demonstrate that the funds were used for legitimate business purposes.

Misusing your Bounce Back Loan funds can have serious consequences to the Director. Bounce Back Loan misuse is still a grey area, but a few points which could be seen as misuse include:

• Using the loan funds for personal expenses or other non-business purposes
• Applying for more money than you should have
• Should not have had the loan to begin with (dormant, never traded, set after the pandemic began etc.)

Watch our red, amber, green test on bounce back loan misuse and fraud for more information.

If you misused the loan, you may be in breach of your loan agreement, and could be subject to legal action and personal liability. Bounce Back Loan misuse is still a grey area, but as a Director who is thinking of closing or is struggling to repay, it’s important you understand what counts as misuse by speaking to a confidential helpline who can assess your individual circumstances.

HMRC are undertaking checks into the use of Bounce Back Loans and other Covid support schemes, meaning they could investigate your company. It's best to get in touch with us to discuss any potential implications and options.

If you’ve received a Bounce Back Loan and close the company through the process of liquidation, part of a liquidator’s duty is to investigate and report on the Directors conduct.  This will include reviewing all the bank statements to understand if there is any illegal dividends / Directors loan / misuse of funds etc. They will also look into how the Bounce Back Loan funds were allocated - ensuring that any funds were used for the genuine economic benefit of your business, and not for personal gain. If you are found to have misused the funds from a Bounce Back Loan, there can be serious legal and financial consequences.

So, before you consider liquidation of your company, please speak to a member of our team. As we do all the analysis pre liquidation to ensure it’s the most appropriate route for you to take and assess any risk of unexpected personal implications.

If you're a Sole Trader who is struggling to repay their Bounce Back Loan, you do not have the same level of personal protection as Limited Companies, and are personally liable for the Bounce Back Loan.

The first step is to speak to your lender (the bank) directly to discuss your options. They may be able to offer you a repayment plan, such as the PAYG options, that will make repayments more manageable for your business.

However, if you're still struggling, you need to seek guidance as soon as possible from The Directors Helpline – we can help you explore alternative options for your Bounce Back Loan.