Bounce Back Loan Scheme (BBLS) background
The Bounce Back Loan Scheme (BBLS) was introduced to help small and medium sized businesses to obtain finance quickly to survive the challenging times caused by the Covid-19 global pandemic.
Eligible businesses could borrow up to a maximum of £50,000 with no fees or interest to pay for the first 12 months. After 12 months the interest rate is fixed at 2.5% p.a. The initial length of the loan is 6 years. The loan can be repaid early without penalty but no repayments are due during the first 12 months. The BBLS came to an end on 31 March 2021.
According to the latest data published by HM Treasury, £47.36 billion had been deployed to more than 1.5 million SMEs through the BBLS.
Demand letters from lenders and banks
Some businesses have already received letters from banks and lenders seeking repayment of their bounce back loans. If you are struggling to repay the loan you should speak to the bank or lender.
There are three options which the Government have now incorporated into these loan agreements which can be used to assist your short term cash flow:-
- You can elect to delay all repayments for a further 6 months after the initial 12 month period.
- You can extend the length of the loan from six to ten years.
- You can elect to make payments of interest only for a six month period. This option is available three times during the term of the loan.
Many businesses struggled during the earlier the lockdowns and relied on BBLS to keep afloat during these extremely difficult times. However, with the easing of legal restrictions around the re-opening of the economy in the summer, businesses from all sectors have had to make decisions at a time when their financial resources may have been eroded during the lockdowns.
Unfortunately the anticipated economic slowdown due to the very rapid spread of the Omicron variant will raise questions in some business owners’ minds as to whether their business can survive and trade profitably into the uncertain economic future ahead.
Business owners are now asking themselves very specifically how they can repay their bounce back loan and they must now seriously consider the implications if they cannot, bearing in mind their other ongoing commitments such as servicing other loans, tax arrears, paying staff now off furlough, starting repayment of business rates and settling rent arrears with their landlords.
Please also bear in mind the new Covid support measures announced by The Chancellor on 21st December and summarised here.
Directors’ responsibilities
Directors and other business owners should by now have evaluated their financial position. It is important that directors and business owners take a critical review of their bounce back loan and consider whether or not they can repay it and other financial commitments. If it is not possible, there may be no realistic chance of avoiding insolvency.
The Companies Act is clear that whereas a director’s duty is principally to the shareholders, that changes in the event of insolvency when the principal duty is to the creditors. Great care should be exercised at that stage and directors are advised to seek early and appropriate professional advice from a reputable Licensed Insolvency Practitioner, to avoid worsening the position and potentially attracting personal liability.
How we can help
If you are concerned that you may not be able to repay your bounce back loan, please contact your usual RPG contact who can put you in touch with one of our Licensed Insolvency Practitioners at Royce Peeling Green for a confidential chat.
Our Licensed Insolvency Practitioners have many years of experience in corporate recovery and insolvency and they can provide you with impartial advice and recommendations, entirely without obligation.
Contact us now to explore how we can help you by calling 0161 608 0000 or email info@rpg.co.uk