What happens if I cannot pay my BBL

If you think cannot pay your Bounce Back Loan you should call us immediately. You probably need to face the possibility that your company is insolvent. It is important to get advice so we suggest you take advantage of our free initial consultation as soon as possible.

Not being able to see a way to meet your obligations in relation to your BBL repayments is a situation that no business want's to be in. What it means and what to do about it will be uppermost in your mind. 

Am I personally liable for the BBL if the Company is unable to pay it?

The commonly held view is that because these loans are guaranteed by the government there will be no personal liability. This is correct in essence but there are some issues that directors need to be aware of which may make things a little more complicated.

If the BBL was incorrectly obtained, you may have breached the terms of the loan in the first place. When you applied for a BBL, you confirmed that you were eligible for the loan. It is not currently clear what action will be taken by the banks if this has happened but we have already seen a director being disqualified in these circumstances. Therefore we will suggest you give us a call. 

 The rules that may inadvertently have been broken are:

• You could only apply for 25% of your turnover in the year ended 31 December 2019 up to a maximum of £50,000.
• You could only apply if the Company was a viable business on 31 December 2019 (this means somewhere in the Insolvency process someone will be asking if the business was insolvent prior to the end of 2019?).
• The business (and any wider group of which it is part) was not already in the process of applying for or had received a Loan. That means ‘one business, one loan’. I have already seen examples of multiple loans being obtained.
• You will use the loan only to provide economic benefit to the business and not for personal purposes. (see below for an example of actions that could be considered to be infringing this rule)

If it can be proved that any of the conditions were not met, then it is possible that the loan could be deemed to have been illegally obtained.

You should be aware that in an insolvency process, the Insolvency Practitioner has a duty to review the director’s conduct. We have been informed by Government that we should review how the funds were used in relation to the terms of the loan.

Common problems will be:

• If the funds have been used to buy personal assets, for example cars or property, then this may be considered inappropriate. If you misused the loan, then action could be taken against the director.
• If the funds were used to pay one class of creditor in preference to another, for example to repay a family loan whilst not paying HMRC, this, again, could give rise to a potential claim against the director.

Hopefully the above will not be an issue for you, but we believe it is better for you to be informed rather than head into any insolvency process without understanding where you stand.

Contact us if anything you read on this page has made you concerned you may be heading for a problem paying your Bounce Back Loan commitments. We are happy to discuss this with you further and offer a free 20 minute initial call to talk through your problems.