Are you one of the businesses which does 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 you are not alone.

However, it 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 don’t repay your Bounce Back Loan?

This is an untrodden path, so not repaying your bounce back loan may be considered perfectly ok as it was the shot in the arm the economy needed to stop an enormous meltdown, but there is every chance it might not.

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.

Using it to repay your own (director’s) indebtedness to your company or using it to pay your personal outgoings or kit out your home with the latest cinema and music system for you to enjoy during lockdown is not.

You could point out that the Bounce Back Loan came with no personal guarantees and it was my company that borrowed the money.

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, which are very different to acting in your own best interests. This is clearly set out in the Companies Act 2006.

OK, but will the government chase the debt at all? 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, repayable over a much longer period when borrowers cannot afford to repay – or waived entirely under exceptional circumstance.

However in the first instance, 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.