Can’t Repay a CBILS Loan? Options and Advice for UK Company Directors

If you’re struggling to repay a CBILS loan, it’s crucial to understand your options and the potential consequences.

Many UK businesses are facing similar challenges due to post-pandemic economic pressures.

This guide is tailored for UK company directors, providing clear, actionable advice on managing CBILS loan repayment issues and outlining the next steps.

Understanding CBILS vs. Bounce Back Loans

The Coronavirus Business Interruption Loan Scheme (CBILS) provided UK businesses financial support during the pandemic, offering loans up to £5 million. In contrast, the Bounce Back Loan Scheme (BBLS) capped loans at £50,000. A key difference is the government guarantee: CBILS loans were 80% guaranteed, while BBLS loans had a full 100% guarantee.

Personal guarantees also set them apart. CBILS loans under £250,000 did not require personal guarantees, although they could be necessary for larger amounts, with restrictions. BBLS did not allow personal guarantees at all. These distinctions impact repayment obligations, as directors with CBILS loans over £250,000 might face personal liability if a guarantee was signed.

Here’s a quick comparison:

Factor	CBILS	BBLS
Loan Cap	Up to £5 million	Up to £50,000
Government Guarantee	80%	100%
Personal Guarantees	Possible over £250,000	Not allowed

Understanding these differences is crucial for directors assessing their repayment responsibilities and potential liabilities.

 If You Can’t Repay: Initial Steps to Take

If you’re worried about missing a CBILS loan repayment, act quickly. Contact your lender immediately to discuss options such as restructuring the loan or extending the repayment period. Lenders are more likely to help if you engage proactively.

Next, assess your company’s cash flow thoroughly. This will help you understand your financial position and identify areas to cut costs or improve efficiency, which is crucial before considering formal insolvency procedures.

Seek professional advice from a licensed insolvency practitioner. They can provide tailored guidance and explore options like refinancing or entering into a Company Voluntary Arrangement (CVA).

Here’s a mini-checklist for immediate actions:

• Contact your lender: Discuss potential forbearance options.  
• Review cash flow: Identify financial strengths and weaknesses.  
• Seek expert advice: Consult with an insolvency practitioner.  
• Consider restructuring: Explore refinancing or CVA options.

Potential Consequences for Your Business

Failing to meet CBILS loan repayments can lead to serious consequences for your business. Initially, you may face creditor pressure as lenders seek to recover their funds, which could involve persistent demands for payment and late payment fees, worsening your financial difficulties.

Lenders may escalate enforcement actions if repayments remain unfulfilled, potentially initiating formal insolvency proceedings against your company. This strains business operations and severely impacts your company’s credit standing, making future borrowing more challenging.

Insolvency proceedings, such as administration or liquidation, may follow. In administration, an appointed administrator attempts to rescue the company or achieve a better outcome for creditors than liquidation. Liquidation involves selling company assets to pay debts, ultimately leading to the company’s dissolution.

These proceedings can have long-lasting effects on your business’s reputation and financial health. Addressing repayment issues promptly and seeking professional advice to explore options is crucial before escalating the situation.

When Directors Could Face Personal Liability

Directors of UK limited companies with outstanding CBILS loans may face personal liability if they have provided personal guarantees or engaged in misconduct. For loans over £250,000, lenders might have required directors to provide personal guarantees. Still, these cannot include the director’s Principal Private Residence as security and are capped at 20% of the outstanding loan after applying business assets.

Director misconduct, such as wrongful trading, can also lead to personal liability. This occurs when directors continue trading despite knowing there is no reasonable prospect of avoiding insolvency. For instance, if a director continues to accrue debt knowing the company cannot repay it, they could be held personally accountable for those debts.

Directors acting in good faith and making informed decisions based on professional advice are less likely to face personal liability. To mitigate risks, directors must maintain transparent records and seek early advice from insolvency professionals. Understanding these nuances helps directors navigate their responsibilities while safeguarding their personal assets.

Practical Options for Struggling Businesses

If your company struggles to repay a CBILS loan, consider refinancing or restructuring, informal negotiations with creditors, or formal insolvency procedures. These options can help manage financial difficulties effectively.

Refinancing or Restructuring

Refinancing involves replacing your existing loan with a new one, potentially with more favourable terms. This can provide immediate relief by reducing monthly payments or extending the repayment period. Restructuring, such as a Company Voluntary Arrangement (CVA), allows you to negotiate new terms with creditors. A CVA is a legally binding agreement enabling you to pay off debts while continuing operations.

• Process: Engage with a licensed insolvency practitioner to assess your financial situation and propose a CVA to creditors.  
• Outcome: If agreed upon, your company can continue trading while repaying debts under new terms. 

Informal Negotiations with Creditors

Before formal proceedings, consider negotiating directly with creditors. Many lenders are open to discussing revised payment plans if approached early and transparently.

• Process: Contact creditors to explain your financial situation and propose a feasible repayment plan.  
• Outcome: Successful negotiations can lead to reduced payments or extended deadlines without formal insolvency.  

 Formal Insolvency Procedures

If informal measures fail, formal insolvency procedures may be necessary. A Creditors’ Voluntary Liquidation (CVL) is one such option, where directors voluntarily close the company due to insolvency.

• Process: Appoint an insolvency practitioner to liquidate the company’s assets and distribute proceeds to creditors.  
• Outcome: The company is dissolved, and debts are settled as far as possible from available assets.  

Each option has its implications, so seeking professional advice tailored to your specific circumstances is crucial.

If you’re worried about personal liability on a CBILS Loan you cannot repay, our licensed insolvency practitioners and business rescue specialists can clarify the rules, explain when guarantees apply, and guide you through your next steps. Call us free on 0800 074 6757 for expert advice.

CBILS Loan Repayment FAQs