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Can’t re-pay a Bounce Back or Coronavirus Business Interruption Loan?

Published: 15/03/2021 By Jane Price

If you are a director of a business struggling to re-pay your Bounce Back loan (BBLS) or Coronavirus Business Interruption Loan Scheme  (CBILS) you may be at the end of your tether and very worried about your options.  

The Governments ‘Pay As You Grow’ measures were put in place with the options to:
• Extend the length of the loan from six years to ten, at the same fixed interest rate of 2.5%.
• Make interest-only payments for six months, with the option to use this up to three times throughout the term of the loan
• Request a six-month repayment holiday once during the term of the loan.

If these measures still do not help you what are your options?
Our advice, in the first instance, is to talk to your lender as there may be specific terms attached to your arrangement. Some lenders implement personal guarantees on loans which could hold the director personally liable for the debt.  


Options for Limited Companies  

Company Voluntary Arrangement (CVA)
A CVA could be an attractive solution allowing the business to continue trading and repay its debts.  The commercial terms can be very flexible. The scheme can simply provide for payments out of future cash flows, or perhaps the sale of assets or less usually to exchange debt for new shares. Ultimately, the business must show it has a viable future.  
 
Administration
Administration is another option where more substantial restructuring is required. This solution is often used where directors have doubts continuing to trade when the company is, or likely to become insolvent. An administration solution would aim to preserve value in the business, protect employee jobs and produce the best outcome for creditors. Administrations are often carried out in conjunction with a Pre-Pack sale, which involve negotiations for the sale of the company’s asset prior to Administration. The appointed Insolvency Practitioner would take full control of the Company affairs.

Creditors Voluntary Liquidation (CVL)
Sometimes it makes business sense to close a company and a CVL is a voluntary process available to directors who want to instigate an orderly winding up of the company.  This process is normally used when a company is balance sheet insolvent and/or is unable to pay its liabilities as they fall due and the only option is to cease trade. As insolvency practitioners we have exit options only available to members of our profession. If you want to close your company we will almost certainly have a business exit solution to suit your needs.

Options for individuals  

Sole Traders are not able to apply for Coronavirus Business Interruption Loans but can apply for Bounce Back Loans. If you find you are unable to repay a Bounce Back Loan, an Individual Voluntary Arrangement (IVA) may be a good option. An individual voluntary arrangement (IVA) is a process normally undertaken to avoid bankruptcy and allows a better return for creditors than in bankruptcy.

If you would like some free advice as to which of these options may be best for your current situation, please get in touch and we will happily go through all the details with you.

Call us on 020 8661 7878 or email insolvency@turpinba.co.uk