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Can’t Pay Bounce Back Loan or CBILS?

We provide expert financial advice if your business is struggling to repay a Bounce Back Loan or Coronavirus Business Interruption Loan

Why Choose Hudson Weir?

  • Professional ICAEW-accredited insolvency practitioners
  • Over 20 years' experience in resolving financial difficulties
  • Free one-hour confidential consultation for all our enquiries
  • Qualified IPs with experience dealing with BBLS and CBILS debt
  • Quick response times, offering expert advice regardless of sector
  • Expert advice on liquidating a company that has a BBL or CBIL

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Coronavirus Support Loans

In response to the economic uncertainties triggered by the COVID-19 pandemic, the British Business Bank PLC, a development bank wholly owned by the British government, introduced the Bounce Back Loan Scheme (BBLS) and the Coronavirus Business Interruption Loan Scheme (CBILS).

These aimed to help businesses during the pandemic. Applications for these loan schemes closed in 2021. However, with a standard loan term of six years for the BBL and CBIL, many businesses are still repaying them.

What is a Bounce Back Loan (BBL)?

The Bounce Back Loan Scheme, administered by the British Business Bank, emerged as a lifeline tailored for small and medium-sized businesses. Eligible companies could secure loans equivalent to 25% of their annual turnover up to £50,000, with a fixed interest rate of 2.5%.

The BBLS was 100% guaranteed by the government, meaning that no personal guarantees were required on Bounce Back Loans.

The repayment term spans up to six years, with an initial 12-month repayment holiday and interest payments made for the first year by the government. Repayments can be made at any time with no early repayment fee.

Despite the BBLS’s essential financial support, businesses may need help to meet repayment obligations. After the initial 12 months, the monthly repayments could become a hurdle for small and medium-sized businesses undergoing prolonged financial difficulties. Under the Pay As You Grow scheme, it is possible to extend the loan term to 10 years.

What is a Coronavirus Business Interruption Loan (CBIL)?

The Coronavirus Business Interruption Loan Scheme, another initiative the British Business Bank facilitated, targeted larger enterprises facing challenges due to the pandemic.

Like the BBLS, the CBILS offered businesses a 12-month capital repayment holiday. For the first year of the loan, interest payments were also made by the UK government.

Similar to BBLS, businesses that took part in the Coronavirus Business Interruption Loan Scheme may encounter challenges in meeting repayment obligations if faced with financial difficulties.

The interest rate on a CBILS loan may be variable or fixed, adding another layer of complexity for businesses navigating financial challenges. The six-year loan term may burden businesses facing sustained economic challenges. It is possible to secure a CBILS loan extension to 10 years. However, this comes down to the discretion of the lender.

Unlike BBLS loans, the government 80% guaranteed CBILS loans, meaning lenders may have requested security over business assets or a personal guarantee for CBILS loans over £250,000. A personal guarantee means your assets may be at risk if your business cannot repay.

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Can’t pay Bounce Back Loan or CBIL?

In the case of the BBLS and CBILS, despite government guarantees, liability to repay remains with the business that has taken out the loan unless it enters liquidation.

If your business is going to default on a Bounce Back Loan repayment, it’s likely you simply must pay it as soon as possible. However, struggling to make a repayment may be indicative of deeper financial issues for a business.

If this is the case, seeking help and advice as soon as possible is vital to prevent the situation from becoming more serious and defaulting on another CBIL or Bounce Back Loan repayment.

If your business is struggling to repay a Bounce Back Loan or Coronavirus Business Interruption Loan, we recommend that you seek the advice of a licensed insolvency practitioner.

Insolvency practitioners can help a business navigate the complexities of financial distress and can offer strategic guidance relating to CBIL or Bounce Back Loan repayments.

Seeking the advice of a licensed insolvency practitioner early can help your company avoid malpractice and an HMRC Bounce Back Loan investigation.

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How can an insolvency practitioner help?

1

Financial assessment and evaluation

Insolvency practitioners can expertly evaluate a business’s financial health. Through in-depth financial analysis, they can pinpoint the root causes of financial distress, whether it be cash flow issues, unsustainable debt levels, or operational inefficiencies. Understanding these underlying issues is essential for devising effective recovery plans.

2

Negotiation with creditors

One of the key responsibilities of an insolvency practitioner is negotiating with creditors on behalf of the distressed business. In cases where a business cannot meet its loan obligations, skilled negotiation becomes paramount.

Insolvency practitioners can engage with creditors to explore debt restructuring, an extended repayment period, or other arrangements that provide breathing room for struggling businesses.

3

Company Voluntary Arrangement (CVA)

One such option for businesses struggling with BBLS or CBILS repayments is a Company Voluntary Arrangement (CVA). A CVA is a formal process that allows a business to reach a binding agreement with its creditors to repay debts over an extended period. Insolvency practitioners can guide businesses through the CVA process, ensuring it aligns with the company’s financial capabilities and goals.

4

Navigating personal guarantees

The presence of personal guarantees, such as when dealing with a CBIL, adds a layer of complexity to the insolvency process. Insolvency practitioners can provide guidance on how to navigate personal guarantees, minimise personal liability, and protect the personal assets of business owners as much as possible.

5

Utilising government support measures

Insolvency practitioners can assist businesses facing a Bounce Back Loan default in leveraging various support measures offered by the UK government. This includes exploring grants, subsidies, or other financial assistance programmes. For example, the Pay As You Grow scheme for the BBLS is designed to alleviate the economic strain on businesses concerned about a Bounce Back Loan default. Similarly, an insolvency practitioner may be able to help your business secure a CBILS loan extension to 10 years.

6

Crafting a comprehensive financial recovery plan

Beyond addressing immediate challenges, insolvency practitioners can work with viable businesses to craft comprehensive financial recovery plans.

These plans may encompass strategic measures to restore profitability, improve cash flow, and enhance financial resilience. The goal is to overcome the immediate crisis and position the business for long-term sustainability.

7

Formal insolvency processes and liquidation

Sometimes, a formal insolvency process where a company is wound down and enters into liquidation may be necessary. This is the only way to implement a Bounce Back Loan write-off, as companies remain liable for the debt while they continue to trade. Insolvency practitioners are well-versed in guiding businesses through the administration and liquidation processes.

While these processes can be challenging, they provide a structured framework for addressing outstanding debts. They may also be the only option for companies if they cannot repay and need to get their CBILS or Bounce Back Loans written off. A professional insolvency practitioner can ensure you follow correct practices when liquidating a company that has a Bounce Back Loan. This can help you avoid an HMRC Bounce Back Loan investigation.

What happens to a BBL or CBIL if my company is liquidated?

Closing company with Bounce Back Loan

A Bounce Back Loan is treated as an unsecured debt if your company is forced to enter liquidation. This is the case whether closing a limited company with a Bounce Back Loan, a PLC, or a sole trader – the business pays off what it can of the debt during liquidation.

Typically, lenders may have asked for a personal guarantee on such a loan, meaning that your assets would be at risk if your company could not repay. However, the 100% government guarantee on the BBLS means you are protected from personal liability for repayment. Therefore, in most cases, any BBLS debt that cannot be covered by the liquidation of company assets is written off.

Closing company with CBIL

The Coronavirus Business Interruption Loan Scheme works slightly differently, as the initiative is only 80% guaranteed by the government. Therefore, for loans over £250,000, lenders may have asked the borrower for a personal guarantee.

If this is the case, the guarantor is personally liable for any outstanding CBILS repayments after the liquidation of company assets.

Personal liability: why is it important to contact an insolvency practitioner?

Struggling to make BBLS and CBILS repayments could indicate your company is insolvent or becoming insolvent. Stop trading and seek professional advice immediately if you believe this is the case.

A professional liquidator will be able to ensure you and your business proceed correctly when facing financial issues. The misuse of BBL or CBIL funds or a failure to prioritise creditors in insolvency could lead to an HMRC Bounce Back Loan investigation and directors becoming personally liable for BBLS and CBILS debt.

An insolvency practitioner can advise you on business recovery or in making a formal insolvency arrangement. A Bounce Back Loan liquidation can be complex – get in contact early to ensure you and your business follow the correct practices and procedures.

Are you concerned your business will default on Bounce Back Loan repayments? Don’t hesitate to contact us.

As licensed insolvency practitioners, we can provide expert advice and guidance if you can’t pay back Bounce Back Loan or CBIL debt. We can help your business restructure it through a Company Voluntary Arrangement (CVA) or, if necessary, guide you through the liquidation process.

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If you are thinking about a CVL, all you need to do is get in touch with Hudson Weir.

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Hudson Weir are an established firm of Insolvency Practitioners who specialise in business recovery and corporate financial solutions.

Hudson Weir provides industry leading, nationwide services for its clients with the intention of easing financial pressures and providing recovery strategies for struggling businesses.

Hudson Weir Ltd (Company number 09477593) is a company registered in England and Wales.

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