Worried about paying back a Bounce Back Loan?
In response to the Coronavirus pandemic the UK government backed various schemes which aimed to support businesses. The Bounce Back Loan Scheme (BBLS) and the Coronavirus Business Interruption Loan Scheme (CBILS) both provide access to emergency funding which could help businesses stay afloat.
The difference between BBLS and CBILS
The BBLS is available through a range of British Business Bank accredited lenders. A business can borrow up to a maximum of £50,000 at a fixed interest rate of 2.5%. The BBLS provides the lender with a 100% guarantee against the outstanding balance.
The CBILS allowed SME’s to access loans and other finance up to £5M. In contrast to the BBLS the rate of interest is not fixed, and the lender agrees a commercial rate of interest for a CBIL which means repayments are likely to be higher. The CBILS providers the lender with an 80% guarantee but will pay interest and fees for the first 12 months.
What happens if a Company cannot repay these loans?
Unfortunately, some businesses may find that the impact of Covid-19 is too significant and will not survive.
If your Company cannot repay a BBL or CBIL it is important to seek early advice from a licenced Insolvency Practitioner. As licensed Insolvency Practitioners we at Keystone Recovery offer a professional review of your situation and recommend a course of action that you are comfortable with.
If your business has a good prospect of recovery, we can advise on a formal restructuring plan. If this is not the case then we can assist with placing your Company into voluntary liquidation, which involves the orderly closure of the business.
Understanding the risk of personal liability
To protect company directors from personal liability, the government prevented lenders from requiring personal guarantees under the BBLS, or for loans under £250,000 via the CBILS. This means that if a Company cannot repay the loan, the lender will be an unsecured creditor of the company.
However, there are certain circumstances where directors can find themselves liable to make contributions towards company debts, such as instances of misfeasance (the mishandling or misappropriation of company funds). It is important for directors’ to understand, and act in accordance with their statutory duties, to avoid personal liability.
Contact us for help
The team at Keystone Recovery can provide a same-day consultation to quickly assess your situation and provide the professional advice you need. If you want further information, please contact us for a no obligation chat about options available.