The Bounce Back Loan Scheme in Context
During the height of the COVID-19 pandemic, the UK government launched the Bounce Back Loan Scheme (BBLS) to support struggling small businesses. Over 1.5 million loans were issued, totalling more than £47 billion. Fast forward to 2025, and thousands of business owners are still grappling with repayments.
Many are asking: will Bounce Back Loans be written off?
In this article, we explore what’s currently known, what options are available, and what happens if you can’t repay your Bounce Back Loan in the UK.
What Was the Bounce Back Loan Scheme?
The Bounce Back Loan Scheme was introduced in May 2020 to provide emergency financial relief to small and medium-sized businesses affected by COVID-19. Businesses could borrow between £2,000 and £50,000, capped at 25% of annual turnover. The loans were 100% backed by the government, with no interest or repayments due for the first 12 months. After this initial period, interest was fixed at 2.5% annually. The scheme closed to new applicants in March 2021 but left a lasting impact on the UK’s small business landscape.
Will Bounce Back Loans Be Written Off in 2025?
As of 2025, there is no government policy in place to automatically write off Bounce Back Loans. Although many business owners hoped for widespread loan forgiveness, the UK government has remained firm in its position that these loans must be repaid. Bounce Back Loans are considered official debts, and unless a business becomes insolvent or reaches a formal agreement with its lender, repayment is still required. So, while some debts may be written off through insolvency, there is no blanket debt cancellation scheme for BBLs in the UK.
Government Stance on Writing Off Bounce Back Loans
The UK government, through the Treasury and the British Business Bank, has made it clear that Bounce Back Loans are not intended to be written off. Although there has been public pressure to forgive some of the loans—especially for genuine hardship cases—the official stance remains unchanged. A key concern for the government is the widespread abuse of the scheme, with billions at risk from fraud. Writing off loans en masse would risk rewarding misuse and create unfairness for businesses that have already repaid their loans or are making every effort to do so.
What Happens If You Can’t Repay a Bounce Back Loan?
If you’re struggling to repay your Bounce Back Loan, your first step should be to contact your lender. Lenders are expected to be flexible and supportive under the Pay As You Grow (PAYG) initiative. However, failing to make repayments without arranging a plan can lead to serious consequences. While the loans are government-backed, they are still issued by commercial banks. Defaulting can result in debt collection, impact your business’s creditworthiness, and potentially trigger enforcement action. It’s crucial to seek help early and avoid ignoring repayment obligations.
Bounce Back Loan Repayment Options and Support
Under the Pay As You Grow scheme, businesses have several options to ease their repayment burden. These include extending the loan term from six to ten years, taking interest-only payments for up to six months, or opting for a six-month repayment holiday. These options can be used more than once, depending on the lender. While these adjustments do not cancel the loan, they can help make repayments more manageable. It’s also worth exploring tailored repayment plans with your bank if your circumstances have significantly changed.
Can You Write Off a Bounce Back Loan Through Insolvency?
Yes, Bounce Back Loans can be written off if a limited company becomes insolvent and enters formal liquidation. In this case, the BBL is treated as an unsecured company debt and is included in the overall liabilities written off during the liquidation process. This is often done via a Creditors’ Voluntary Liquidation (CVL). However, this route is only available to limited companies. Sole traders and partnerships may remain personally liable for BBLs, depending on their structure. Directors should seek insolvency advice before considering this route.
Can Directors Be Personally Liable for Bounce Back Loans?
In general, directors are not personally liable for Bounce Back Loans as no personal guarantees were required. The loans were designed to protect business owners from personal financial risk. However, personal liability can arise in certain circumstances—particularly if the loan was obtained fraudulently or the funds were misused. For example, using the loan for personal purchases, or continuing to trade while knowingly insolvent, may trigger investigations. The Insolvency Service has the authority to take action against directors found to have acted improperly.
Legal and Financial Consequences of Defaulting
Defaulting on a Bounce Back Loan can have far-reaching consequences. Although lenders must exhaust options like PAYG first, they can still escalate recovery efforts if payments are missed. In the event of insolvency, directors may be investigated for wrongful or fraudulent trading. Sanctions can include director disqualification, personal liability for debts, or even prosecution in severe cases of fraud. While the loans are not secured against personal assets, misuse or negligence can still expose directors to legal action and reputational damage. It’s essential to approach the situation responsibly.
Alternatives to Liquidation: Business Recovery Options
Liquidation isn’t the only option for struggling businesses with a Bounce Back Loan. If your company is viable but currently cash-strapped, you may be able to propose a Company Voluntary Arrangement (CVA). This allows you to repay creditors—including your BBL—over a set period. Informal negotiations with lenders and Time to Pay arrangements with HMRC are also worth exploring. These alternatives can help preserve the business and avoid closure. Seeking advice from a licensed insolvency practitioner can clarify your best course of action based on your financial circumstances.
Seeking Help: Who to Contact If You’re Struggling
If you’re finding it difficult to repay your Bounce Back Loan, professional support is available. We can help assess your situation and guide you through options such as liquidation, CVAs, or restructuring.
Free, impartial advice is also available from organisations like Business Debtline, Citizens Advice, and the Federation of Small Businesses. Speaking to your accountant or business adviser can also be beneficial. The key is to act early—delaying could limit your options and increase the likelihood of legal or financial repercussions.
Will Bounce Back Loans Be Written Off in the UK? Final Thoughts
In summary, Bounce Back Loans will not be written off automatically in the UK. While the government provided these loans to support businesses during an unprecedented time, they are still considered repayable debts. For some, insolvency may lead to the debt being written off, but this is a serious step with legal implications. The best approach is to seek professional guidance, understand your options, and act early. Whether through repayment support or formal insolvency procedures, help is available for business owners facing repayment challenges in 2025.
Frequently Asked Questions
Can Bounce Back Loans Be Written Off If I Close My Company?
Yes, if a limited company is liquidated through a formal insolvency process, such as a CVL, the Bounce Back Loan can be written off as an unsecured debt. This does not apply to sole traders.
What Happens If I Can’t Pay My Bounce Back Loan Back?
If you can’t repay your Bounce Back Loan, contact us immediately. You may be offered support through Pay As You Grow options. Ignoring the debt can lead to enforcement action and credit issues.
Are Sole Traders Liable for Bounce Back Loan Debts?
Yes, in most cases, sole traders are personally liable for repaying Bounce Back Loans. Unlike limited companies, there is no legal separation between the individual and the business.
Will the Government Cancel Bounce Back Loans in the Future?
There are currently no plans for the government to cancel or write off Bounce Back Loans on a wide scale. Loan forgiveness is unlikely unless insolvency or fraud investigations are involved.
Is a Bounce Back Loan Classed as a Personal Debt?
Not for limited companies. Bounce Back Loans are company debts. However, for sole traders, the loan may be considered personal debt, depending on how the business is structured.
How Do I Write Off a Bounce Back Loan Legally?
The only legal way to write off a BBL is through an insolvency process such as company liquidation. Directors must act responsibly to avoid accusations of misconduct or fraud.
Can I Be Taken to Court for a Bounce Back Loan?
Yes, if a lender believes you are deliberately avoiding repayment, they may pursue legal action. However, they are expected to offer repayment support first under government guidelines.
Will Bounce Back Loan Debt Affect My Personal Credit Score?
For limited companies, BBLs should not impact personal credit unless the loan was obtained fraudulently or there’s misconduct. Sole traders, however, may see personal credit implications.
