Can’t afford to repay your Bounce Back Loan (BBL)? Let’s explore your options…

When the pandemic hit, millions of businesses were left in a hopeless situation. A number of options were made available by the Government, which mainly benefitted employees (such as the furlough scheme). This left limited companies in a very tricky situation where lending became the only sensible option.

For smaller businesses, this was through Bounce Back Loans.

The Bounce back Loan Scheme (BBLS) was relied on heavily. Nearly 1.4 million businesses took advantage of the scheme, borrowing a total amount of £42.2 billion. But now the 12 month repayment break has ended, what is next?

If you can’t afford to repay your bounce back loan, here are your options:

Dissolve Your Company

In the past, people used to dissolve their company when it was struggling. At the time, this wasn’t strictly against the law. Directors used to use this loophole the close their company without further repercussions. This has now changed. The Insolvency Service has been given sweeping powers to investigate directors of companies that have dissolved their companies with debt. If you have seen business news recently, this change won’t come as a shock to you. There has been a number of high profile stories produced about directors trying to close down their companies.

If you owe money to anyone at all, you will need this written consent to dissolve your company. There are no exceptions to this rule. Without written consent, you would be breaking the law and you would no doubt be prosecuted. If you have already dissolved your company and it has slipped the net, you should reverse this immediately.

Your creditors will also have the power to revive the company at any point, if your company owes them money. You may also face personal litigation (due to you not following the law).

The measures included in the Ratings (Coronavirus) and Directors Disqualification (Dissolved Companies) Bill are retrospective and will enable the Insolvency Service to also tackle Directors who have inappropriately wound-up companies that have benefited from Bounce Back Loans.

If you would like to dissolve your company, you can apply for dissolution through the Companies House website by clicking here.

Company Dissolved

Liquidate Your Company

Have you ever heard stories about people losing their businesses, then losing their homes and sometimes their sanity at the same time? Say hello to liquidation!

Company liquidation is not to be taken lightly. If you have ever spoken to a liquidation company, they sound like the friendliest people in the world. They tell you things like “we will sweep it all under the rug”, “it will be gone within a week or two” and “you will write off all your debt in one clean swoop”. Lies.

Liquidators make a lot of money, but they often charge a small upfront fee. Wonder why? It is because liquidators have got powers which far outweigh debt collectors, bailiffs and your creditors. Once you sign up for liquidation, you are appointing a liquidator to take your place as head of the business. It is their legal duty to investigate the reason for the company’s failure. This is where they start. They have access to everything. Every invoice, every transaction and often all business emails and correspondence. How do they get this? They order you to provide it to them.

Once you choose liquidation, you will quickly realise that a nightmare scenario is unfolding. The liquidators demand information by letter, so you are often bombarded with letters at your home address. These are sent special delivery, so you may feel that you are working at the Royal Mail Depot as an endless steam of couriers turn up to your house to deliver this “important mail”.

What are liquidators looking for?

To keep it simple, they are looking for anything which they can make money on under the guise of “acting in the best interest of your creditors”. If you ever look at a liquidation report, their fees are enormous and it is very rare that creditors receive a substantial amount of money. A lot of them will receive nothing at all, as any money received is often used to cover the liquidators fees.

The scenario with bounce back loans and liquidation will go like this…

  • If you have paid yourself or any connected party any money whilst the company was not making profit, you will need to repay it.
  • If you have used bounce back loan money to cover personal bills, you will need to repay it.
  • Paid a dividend whilst you’re not making profit? You will need to repay it.
  • Gone out for Nandos and used the bounce back loan money to pay for it? You will need to repay it.

If you receive a demand for payment, your options are very limited. Nobody can argue that the liquidator isn’t acting in the best interest of its creditors and you can’t argue that you are acting in the best interest of your company. Even if the cash has been used for company purposes, these will be scrutinised as you are not supposed to be trading if you are not solvent. The situation is messy, to say the least and the only winner will ever be the liquidator.

If you choose to defend claims, you will need a solicitor to represent you. With a typical cost of £200/hour, it gets very expensive, very quickly!

In liquidation

Sell Your Business

The only other option to exit your business is by selling it. It is entirely possible to sell a business, even if it has debts. Thousands of businesses successfully sell every year and the market is thriving. Rightbiz alone has over £10 billion worth of businesses for sale, at time of writing.

When you sell your limited company, the limited company keeps all of the debt that the company has built up whilst it is trading. This includes all bounce back loans, HMRC debt and any other unsecured creditors you may have. So from the moment you sell your shares, the company is no longer your responsibility. This means that you are free to get on with your life, without any concern of creditors demanding payments or liquidators knocking on your door. As you are selling your business as an “ongoing concern”, you are free from any future investigations as you have sold the business in its current state. Selling a business for £1 is the same process as selling a business for £10million. Although it’s a lot quicker to sell a business for £1, of course.

It would be very difficult to sell your business on Rightbiz, after all who would want to buy a distressed business? But that doesn’t mean that there are no options for you.

Selling a business can take a long time, but there are business brokers who specialise in 24 hour guaranteed business sales. If you choose one of these companies, they will 100% guarantee that your company will be sold within 24 hours of your providing all of the details to them. You will be provided with a share purchase agreement and the details would be updated on Companies House, allowing you to finally move on from your distressed business. It is the only legal way to move on from your business and avoid liquidators.

After researching a number of brokers and their reviews, we would recommend Quick Appoint.

They offer :

  • 24 hour service
  • The lowest prices (starting at £2950 all-in!)
  • Legal documents approved by a UK solicitor
  • You get to keep any company assets (unlike liquidation)
  • Your reputation will stay intact as Companies House won’t display “Company in Liquidation” on your business profile.

Conclusion

If you can’t pay back your bounce back loans, there are options available. You may want to liquidate your company, although we would recommend that you really look into this option before going ahead. If you decide to sell your company, you will get a clean break with no repercussions. So this seems like the most sensible and legitimate way.