Chris is an Insolvency Practitioner regulated by the ICAEW since 2014,.
He is experienced in contentious insolvency with excellent analytical skills and strong knowledge of both general and technical insolvency matters.
In general, you can’t simply write off a Bounce Back Loan while continuing to operate. However, if your company is unable to meet its debt obligations and has to be liquidated, the loan can be written off as part of that insolvency process.
Directors must understand that this is not a decision to be taken lightly and should be made with the guidance of a qualified insolvency practitioner.
The experienced team here at Company Debt is here to help with practical advice, a free consultation, and a clear plan of action.
Will Bounce Back Loans be Written Off by the Government?
The short answer is no. The UK government has not implemented a universal write-off for Bounce Back Loans. Instead, they’re focused on ensuring repayment while offering flexible terms to support businesses.
What Are Your Options if You Cannot Repay Your Bounce Back Loan?
If you’re struggling to repay your Bounce Back Loan (BBL), don’t panic. Several options are available, depending on your business structure:
For Sole Traders:
Negotiate with your Lender
Contact your lender promptly to discuss your financial situation. Be prepared to explain your circumstances clearly and concisely.
Ask about:
Extending your loan term
Reducing payments temporarily
Pay As You Grow scheme options
Before the call, prepare a clear summary of your finances and a proposed repayment plan. This shows you’re proactive and responsible, which may help your case.
Remember, lenders often prefer to work with you rather than risk non-payment. By approaching them early, you’re more likely to find a mutually beneficial solution.
Individual Voluntary Arrangement (IVA)
As a sole trader, you can’t simply write off a Bounce Back Loan (BBL) at will. However, there is a formal process that might allow for partial write-off in extreme circumstances.
You agree to repay a manageable amount based on your finances
After completing the IVA, remaining unsecured debt may be written off
Key considerations:
Professional advice is crucial: An IVA has significant implications
Your credit rating will be affected
Future financial opportunities may be limited
It’s a last resort when other options have been exhausted
Bankruptcy
This should be considered as a last resort. Seek advice from a debt charity or insolvency practitioner first. Apply online through the government’s website.
What happens during bankruptcy:
Your assets may be sold to pay off debts
You’ll face restrictions on borrowing and running a business
The process typically lasts for one year
Remember, bankruptcy is a serious step with far-reaching consequences. It can offer a fresh start, but at a significant cost. Always seek professional advice to explore all alternatives before considering this option.
For Limited Companies:
Negotiate with the Lender
Reach out to your lender to discuss your company’s financial situation.
Request flexible repayment terms, such as extended loan periods or temporary payment reductions. Inquire about the Pay As You Grow scheme options.
Prepare a detailed financial report and a proposed repayment plan to support your case.
Company Voluntary Arrangement (CVA)
A Company Voluntary Arrangement (CVA) is a formal agreement between a business and its creditors to repay debts over a fixed period while continuing operations.
Consult a licensed Insolvency Practitioner to assess if a CVA is suitable. They’ll help draft a formal proposal to creditors, outlining how the company will repay debts over time.
If 75% of creditors (by debt value) agree, the CVA becomes legally binding. The company continues trading while making agreed payments, typically for 3-5 years.
Write off the BBL via Liquidation
This is the final option when the company can’t continue trading.
Appoint a licensed Insolvency Practitioner as liquidator. They’ll wind up the company’s affairs, selling assets to repay creditors.
Be aware that directors may face investigation for wrongful trading if they allowed the company to continue operating while insolvent.
Remember, each option has different implications. Always seek professional advice to understand which is best for your situation. Acting early gives you more options and better chances of resolving financial difficulties.
Understanding the Pay As You Grow (PAYG) Scheme
The PAYG scheme aims to support businesses facing difficulties repaying their BBLs, helping them manage their debt responsibly and potentially avoid more drastic measures such as liquidation.
The PAYG scheme offers:
Extended Repayment Period Extend loan term up to 10 years, reducing monthly payments and allowing more time to generate revenue.
Interest-Only Payments Pay only interest for up to six months, lowering monthly outgoings temporarily and prioritising essential business expenses.
Repayment Holidays Take a six-month break from repayments, providing breathing space to stabilise finances and prepare for future repayments.
Bounce Back Loan Write Off FAQs
Can a Bounce Back Loan be written off if my company is still trading?
No, a Bounce Back Loan cannot be written off while your company is trading. The loan is intended to be repaid in full according to the agreed terms. Only through formal insolvency proceedings such as liquidation can the loan potentially be written off, and this would typically mean the end of trading for your company.
Will a Bounce Back Loan be written off if I cannot make repayments due to financial hardship?
Not immediately. If you’re facing financial hardship, you should first seek to make arrangements with your lender, such as utilising the PAYG options. If your financial situation doesn’t improve, insolvency proceedings might be the next step, where a loan could be written off, but this is a last resort.
Can a Bounce Back Loan be written off as a bad debt on my company’s accounts?
A Bounce Back Loan can only be written off as a bad debt in your company’s accounts if your company is going through insolvency proceedings. In active trading, it is considered a liability that the company is expected to repay.
Is there a legal way to write off a Bounce Back Loan without insolvency?
Legally, there is no provision to write off a Bounce Back Loan without going through some form of insolvency process, whether it’s a company liquidation or an IVA for sole traders.
