Will Bounce Back Loans Be Written Off?

piggy bank wearing a face mask to represent finance during pandemic

The government introduced the bounce back loan scheme to support businesses throughout the Covid 19 pandemic. However, since the pandemic, many business owners have been struggling to meet the monthly repayments for their bounce back loans. If this sounds like you, then you may be wondering, “will bounce back loans be written off?”, or more specifically, “will the government write off bounce back loans?”.  

As it stands at the moment, there are no government plans to write off bounce back loans, and all loans are still liable to recovery action by lenders, or in more severe cases, by law enforcement. The only way a bounce back loan will be “written off” is if the company goes into insolvent liquidation. We’ll look more closely at this option in a moment, but first let’s consider the help that might be available to you. 

Can’t Pay Bounce Back Loan – What Should I Do?

If you can’t pay a bounce back loan, then it’s likely that you’re struggling to meet payments in other areas as well. With regards to repaying your bounce back loan, the Pay As You Grow scheme that was introduced by the government enabled borrowers to delay their repayments (your lender should have contacted you about this). This may have provided some relief to businesses.

However, if you’re still struggling to make your repayments, there are ways to free up funds in other areas to put towards your bounce back loan repayments. As we’ve established that the answer to the question of “will bounce back loans be written off” is a “no”, it’s important to be proactive in tackling these issues head on, rather than hoping that they’ll disappear. Some of the business recovery strategies that you may be able to consider include:

  • Company Voluntary Arrangement (CVA): a binding contract between your company and its creditors to pay back liabilities over a specified period of time
  • Administration: provides an automatic stay on any current or pending legal action, giving the business breathing space to restructure
  • HMRC Time To Pay: a payment plan between your company and HMRC where you’re given additional time to repay taxes owed
  • Refinancing/Restructuring: re-evaluating business model and financial plan in order to make improvements e.g reorganising workforce or cutting overheads

These are options to help your company pay off its debts if it is struggling but still solvent. If you think that your company has become insolvent, then the best option will be to liquidate. 

What To Do If Your Company Is Insolvent

Going back to our earlier question of “will bounce back loans be written off”, the only sense in which a bounce back loan will be “written off” is if the company goes into liquidation. In an insolvent liquidation, the bounce back loan will be treated in the same way as any other business debt. So long as the funds have been used appropriately, borrowers will not be personally liable as bounce back loans did not require personal guarantees. A Creditors Voluntary Liquidation (CVL) will ensure all the affairs of the company are wound up correctly and in the most efficient manner possible. It’s essential to avoid sitting on concerns and allowing debts to escalate as this may result in the company being forcibly wound up, and in some cases, the risk of directors being accused of fraudulent behaviour such as trading whilst insolvent

Key Message To Takeaway

Through discussing the question of “will bounce back loans be written off”, we’ve emphasised that they’re not going to disappear on their own. The government currently has no plans in place to write them off, and the only way in which they will  be “written off” in a broad sense is by the company going into liquidation. With this in mind, the key message is to be proactive in tackling your bounce back loan debt. As soon as you start defaulting on payments, contact a licensed insolvency practitioner who will be able to talk you through recovery strategies for repaying the debt, or the option of liquidating the company if this is most suitable. 

Please don’t hesitate to get in touch with our experienced team of insolvency practitioners at My Liquidation for confidential advice that’s tailored to your business’ requirements. 

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