As any company director who took out a bounce back loan for their business should already aware, there is – potentially, at least – an element of personal liability with this form of credit. Importantly, this is the case even when the enterprise is incorporated as a limited liability company. As such, bounce back loans are not like other types of business debt that you might be operating with at the moment. This government-backed scheme enabled banks and other approved lenders to offer loans to businesses they might otherwise have not lent money to during the pandemic. However, now these loans need to be repaid, some companies are failing to service them, leaving their directors in a potentially tricky situation.
It is important to note that official figures estimate that at least two-fifths of businesses that took out a bounce back loan to see them through the pandemic and emerge from the various periods of lockdown unscathed are struggling to pay them back. In some parts of the country almost half of businesses with bounce back loan debt reckon they will never repay them. Some company directors are, therefore, right to worry about whether their personal assets, including their home or car, for example, might be at risk if they fail to pay their bounce back loan back on time or in full.
That’s where our professional service as experienced insolvency practitioners can be so effective. We can help with bounce back loan restructuring and wider debt consolidation. Crucially, you should act now rather than wait if you want to avoid the potential for personal bounce back loan liabilities.
Please bear in mind that under the Bounce Back Loan Scheme (BBLS), company directors were not routinely asked to provide a personal guarantee for their business loan. This fact should not mean you operate with impunity, however, because that is not the end of the story. Under the rules of BBLS, there are certain conditions that need to have been met including adhering to all of the scheme’s regulations and the so-called director’s duties. In other words, if your lender – or HMRC – thinks that you have not been diligent enough in the way you have managed your loan, then you may face personal consequences regardless of the fact that you haven’t signed a personal guarantee.
Put simply, bounce back loans are not as clear-cut as some assume. Any such loans used to pay off personal debt or to make personal property investments, for example, may mean being personally liable even if the loan was taken out through a limited company. Any formal insolvency procedures that your business may subsequently go through will involve the examination of how bounce back loans were used and what the money was spent on. Any act of misfeasance on the part of the directors with respect to credit obtained under BBLS may result in further action being taken. We would highly recommend obtaining practical advice before you get to such a stage.