Can You Write Off A Bounce Back Loan?

Can My Company Write Off Its Bounce Back Loan?So, can you write off a Bounce Back Loan? The answer is no. The loan must be repaid in full, with interest, over the six-year period. The only provision for writing off the loan is if your business fails and enters Liquidation. However, if you are unable to repay the loan, you may be eligible for a repayment plan.

This would involve making reduced monthly repayments over an extended period of time. If you are struggling to repay your Bounce Back Loan, you should speak to your lender as soon as possible to discuss your options

The Bounce Back Loan Scheme (BBLS) was created by the government in response to the coronavirus pandemic. Under the scheme, small businesses can apply for a loan of up to £50,000.

The loan is 100% government-backed, and businesses have six years to repay the loan. The interest rate on the loan is 2.5% per annum. repayment holidays are available for the first 12 months.

Can My Company Write Off Its Bounce Back Loan?

The answer to this question depends on the specifics of your company’s financial situation. In general, however, the answer is likely to be yes. The Bounce Back Loan Scheme (BBLS) is a government-backed initiative that provides loans of up to £50,000 to small businesses affected by the coronavirus pandemic.

The loans are 100% government-backed, meaning that if your company is unable to repay the loan, the government will cover the cost. This makes the BBLS an extremely attractive option for businesses in need of financial assistance. However, it is important to note that the loan must be used for “business purposes” in order to be eligible for tax relief.

This means that if your company uses the loan to pay for personal expenses, or to repay other debts, you will not be able to write off the loan. Therefore, it is important to speak with an accountant or tax advisor before taking out a BBLS loan to ensure that you are using the loan for eligible expenses.

Government Position on Bounce Back Loan Write Off

On 16th February 2022 the Minister of State (Treasury) (City), The Economic Secretary to the Treasury, John Glen stated:

There is no government policy to wholesale write off loans. Under the Bounce Back Loan Scheme (BBLS) all loans are liable to recovery action by lenders or – in the case of serious fraud or financial crime – law enforcement

The government has guaranteed the bounce back loan Scheme but the British Business Bank is responsible for administrating them. Therefore it is not government policy to write these loans off there appears no prospect of a limited company being able to do so.

What Can You Do If You Can’t Repay A Bounce Back Loan?

The government has foreseen the issues some companies will be facing in repaying these loans and have now introduced a Pay As You Grow (PAYG) scheme to try and combat some of these challenges.

The PAYG scheme was introduced as part of the Winter Economy Plan and is designed to help companies who have started to repay their Bounce Back Loans but are having difficulty in meeting the monthly repayments.

There are three main lifelines offered to companies through the PAYG scheme:

  • Bounce Back Loans can be extended from six years up to 10 years with the interest rate remaining fixed at 2.5%. Lengthening the term of the loan will make monthly repayments lower but you will pay more interest overall.
  • A six-month payment holiday can be taken meaning no repayments will be due during this time. This option can be taken once over the term of the loan.
  • You can opt to pay just the interest on their loan for a period of six months. This will lower the monthly repayment amount for those months. This option can be taken three times over the course of the loan.

While these options will provide additional time and breathing space during months of financial difficulty, the Bounce Back Loan will continue to run and the company will still be responsible for repaying the full amount borrowed.

Insolvent With A Bounce Back Loan

If your company is insolvent with and you are therefore unable to make repayments for the loan when it falls due then in order to write off the bounce back loan Liquidation may be an option to consider.

As a director its your duty to ensure that the creditors position is not made worse, should the Liquidation process be a route you wish to explore to write off your bounce back loan, we can deal with this for you.

Complete an online enquiry to get the process started.