My Company Cannot Afford To Pay Back It’s Bounce Back Loan
When the pandemic started, the government quickly introduced Bounce Back Loans to help companies get through the difficulties until a time they were back on their feet. The take-up was massive, but not all Bounce Back Loans have resulted in a successful continuation of a business. The lenders were not allowed to take security or personal guarantees, and in the event of non-payment, the government has agreed to reimburse the lender.
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For some companies, the additional burden of Bounce Back Loan repayments will be enough to push them into insolvency, especially if there has been no recovery of trade to keep the company going.
Providing the Bounce Back Loan money has been used in the ordinary course of business and to help the company during its recent difficulties, then, if the company had to go into liquidation, there would be no come back against the directors.
Here at Company Insolvency Advice, we always check how Bounce Back Loan money has been used, in order that we can offer some insight as to the likelihood of what may happen if the company goes into liquidation.
Our discussions are always fair and honest, with the intention of giving the director of a limited company, some comfort that the way forward he/she is choosing is the right one.
If you are experiencing problems paying your bounce back loan, speak to the experts today for free impartial advice.
What Happens If You Don’t Pay Your Bounce Back Loan?
As of when this article was written on the 15.02.2022 if you cannot repay your bounce back loan then the likelihood is you will be made insolvent or your company will have to go into insolvency. Insolvency is allowed when a company can no longer repay it’s bills no matter whether this is a loan or a creditor.
The state of insolvency puts directors at risk unless you understand what it means and how it changes your responsibilities.
Insolvency means a directors key responsibilities lie with creditors and not shareholders. This means you cannot pay anyone (employees, yourself, any creditor etc) without risk of showing preference. Showing preference of any kind can contribute to a director being help liable for wrongful trading, a serious civil offence which can make directors personally liable.
This includes using the bounce back loan to pay back a loan which does have a personal guarantee, as that would be showing preference.