Updated 1 November 2020

Despite the BBLS scheme repayment periods being extended to 10 years and being able to request interest only and total payment holidays, a number of businesses do not intend to repay the Bounce Back Loan or Coronavirus Business Interruption Loan.

43% of businesses recently surveyed said they do not expect to be able to repay their Bounce Back Loans, So, if this applies to you, you are not alone.

However, a bounce back loan or CBILS loan is a loan, just like any other, and you will have an obligation to repay it in full.

What will happen to you if you do not intend to repay your Bounce Back Loan?

This is an untrodden path, so not repaying your bounce back loan may be considered perfectly ok. It was the shot in the arm the economy needed to stop an enormous meltdown. But, there is every chance it might not be ok to think you don’t have to repay.

Whether it is ok or not is likely to be determined by what you have done with the loan funds.

Using it to keep your company going but it has not worked out is likely to be ok.

But, using it to repay your own (director’s) loan to your company is not. Neither is using it to pay your personal outgoings or kit out your home with the latest cinema and music system to enjoy during lockdown.

Pointing out that the Bounce Back Loan came with no personal guarantees, it was your company that borrowed the money isn’t good enough.

That is right, but that doesn’t mean as a director of a company that you can carry on with no regard for the consequences of your actions.  A director has to act in the company’s best interests. A company’s best interests are very different to acting in a director’s own best interests. This is clearly set out in the Companies Act 2006.

OK, but will the government chase the debt if I don’t repay the Bounce Back Loan? 

The answer is, nobody knows at this moment in time. Nearly 3/10 of people recently surveyed thought they would not. This may depend on public policy which is likely to develop as time goes by. Mike Cherry, national chairman of the FSB, has suggested that the 100-per-cent government-backed loans should be treated as student loans. This would mean they are repayable over a much longer period when borrowers can afford to repay. They could even be waived entirely under exceptional circumstances.

But, you can’t rely upon hope. It is a debt and needs to be repaid. If it isn’t, the lender will be pursuing your company.

So how can you deal with this?

Well, quite simply if your company is insolvent you should seek to place it into liquidation. A voluntary liquidation is the quickest and easiest way of achieving this and this is where we can help. Call us on 0330 900 2000 to speak to one of our bounce back loan specialists.

If you would like to read more about what you can do it you cannot repay, visit our article here.