Can’t pay back bounce back loan – What are my options?

I cannot afford the monthly Bounce Back Loan repayment amount – can I reduce this?If you can’t pay a bounce back loan, contact your lender as soon as possible as you will offer you the option to postpone repayments for six months with a payment holiday.

The Bounce Back Loan Scheme was introduced to provide financial support to businesses affected by the COVID-19 pandemic, and the terms usually include a fixed low-interest rate and a payment-free period.

Defaulting on the loan could lead to damage to your credit score, increased interest rates, and potential legal action from the lender.
In addition, because the loan was backed by the government, defaulting on repayment could also lead to complications with future applications for government financial support.

It’s crucial to engage in open communication with the lender to discuss any difficulties you’re facing and explore options like renegotiation or restructuring the loan to avoid the negative ramifications of a default.

What to do if you can’t afford to repay a Bounce Back Loan

Limited companies facing difficulties in repaying their Bounce Back Loans should be proactive in addressing the situation. First and foremost, it’s essential to communicate early with the lender, detailing the company’s financial struggles and seeking potential arrangements or renegotiations.

Many financial institutions may be amenable to restructuring the loan, extending the repayment term, or providing a period of interest-only payments. Additionally, companies should assess their financial operations, cutting non-essential costs and optimizing cash flow. It may also be worth considering external advice from financial advisors or insolvency professionals who can provide tailored solutions.

While the business Bounce Back Loan scheme was designed to provide relief during unprecedented times, companies must recognise the gravity of the liability and take swift action to navigate repayment challenges.

Achieve increased flexibility through Pay As You Grow

The Pay As You Grow (PAYG) initiative by the government offers businesses increased repayment flexibility for Bounce Back Loans in times of financial strain. The program encompasses three key choices:

  1. Payment Holiday

You can postpone repayments for up to six months. This complements the initial 12-month payment holiday provided when the loan was first obtained. Eligibility is not contingent on having already initiated repayments.

  1. Extend Loan Term

The option exists to stretch the repayment period from six years to ten years. This halves your monthly payments, albeit resulting in higher overall interest charges across the extended duration.

  1. Interest-Only Period

For a maximum of six months, you can opt to pay only the interest. This trims your monthly payment while preventing additional interest accrual, as is the case with a complete payment holiday.

To make the most of the PAYG flexibility applicable to your Bounce Back Loan reimbursement, adhere to these steps:

  1. Reach out to your lender – Initiate contact with your Bounce Back Loan provider via phone or email to initiate discussions about availing PAYG. Seek clarity on the required documentation.
  2. Formal application – Complete the PAYG application form and provide essential financial records, such as cash flow statements and profit-loss reports.
  3. Obtain approval – If sanctioned, your lender will confirm the revised repayment terms as per your chosen option (payment holiday, extension, or interest-only period).
  4. Adjust repayments – Post-approval, adhere to the new repayment timetable. If a six-month payment holiday is requested, payments will be temporarily suspended.
  5. Resume regular repayments – Following any payment holidays or interest-only intervals, standard principal and interest payments will recommence based on the altered terms.
  6. Financial monitoring – Maintain a close watch on your cash flow to determine the need for potential future PAYG applications. Timely action is advised rather than waiting for missed payments to accumulate.

What happens if unable to pay Bounce Back Loan?

If your business is unable to pay back a bounce back loan the following will happen:

  • The bank will write to you via a letter or email.
  • If repayments have not been resumed the bank or lender will escalate towards debt collection.
  • If the debt collection company cannot make collections the bank will then take court action.
  • Dependent on what type of court action has taken place is dependent on the lenders next step.

Lenders are required to follow ‘appropriate recovery processes’, this means using the Court where necessary.

The terms of the BBLS is that, lenders must offer a 12-month period after they have issued a formal demand to the borrower, when pursuing the outstanding amounts.

What if my company can’t repay any of the bounce-back loan?

Should your company find itself unable to meet the repayment requirements of the bounce-back loan, it could potentially be facing insolvency. In such a scenario, as a director, your responsibilities undergo a significant transformation and demand meticulous attention. Your focus shifts from shareholders to creditors, necessitating swift action to seek expert guidance on insolvency matters.

Directors might explore the possibility of initiating voluntary liquidation for the company, provided the loan funds were utilized as intended. This course of action can be pursued without exposing directors to personal liability

What are the implications for Directors?

In broad terms, unless you’ve provided a personal guarantee for company loans or engaged in trading while insolvent or mishandled assets, personal liability typically doesn’t apply.

Apart from this, insolvency practitioners have the responsibility of probing the company’s financial state pre-insolvency. In instances where evidence surfaces indicating that directors were aware of the company’s insolvency, the liquidator is compelled to delve into this matter.

The actions HMRC intends to take against directors who have misappropriated these funds remain unclear. Nevertheless, HMRC has assigned personnel within a dedicated department to concentrate on investigating bounce-back loan fraud. As of the current writing, instances exist where directors have faced imprisonment due to substantiated and purposeful misuse of these funds.

How to minimise personal risks from a bounce back loan?

Directors were requested to verify that their limited companies were free from insolvency during the initial application for the bounce-back loan. Assuming this confirmation holds true and the funds were appropriately utilized, personal liability concerns should not arise when navigating liquidation or business closure.

Opting for a creditor’s voluntary liquidation in cases of company insolvency could mitigate risks. In this context, the liquidator’s scrutiny of the director’s past actions might be less rigorous compared to situations where a hostile creditor initiates compulsory liquidation.

However, the responsibilities of directors amplify when a company becomes insolvent, making it prudent to seek guidance from a licensed insolvency practice like ours. Such professional expertise can evaluate any additional corporate debts that might potentially trigger personal liability for directors beyond the scope of the bounce-back loan.

If I can’t pay, will the bounceback loan be written off on liquidation?

Among the queries frequently posed by company directors confronting insolvency, the inquiry regarding the fate of the bounce-back loan in relation to other corporate debts stands out. To put it plainly, yes, the bounce-back loan is encompassed within this context. The liquidation process concludes all unsecured business debts, alongside the closure of the company itself.

The responsibility of executing liquidations falls upon licensed insolvency practitioners. Within this framework, all creditors, including the Bounce Back Loan financier, receive payments according to a predetermined order of precedence. The Liquidator facilitates the realization of funds for creditors by liquidating any available company assets.

Liquidation if Repayment is Impossible

In situations where your business is not able to make PAYG repayment for settling the Bounce Back Loan, it maybe necessary for liquidation.

Here’s a condensed view of the process:

  1. Insolvency Practitioner Involvement: A licensed insolvency practitioner assumes responsibility for overseeing the liquidation. The valuation and identification of all company assets take place.
  2. Asset Valuation and Sale: Assets are appraised and subsequently sold to generate funds. These funds are then allocated to creditors based on a predetermined order of priority.
  3. Company Dissolution: Once these steps are completed, the company undergoes dissolution. Any outstanding debts, including the remaining Bounce Back Loan amount, are discharged.
  4. Two Main Liquidation Types:
    • Creditors’ Voluntary Liquidation: This type is initiated by directors when the company faces insolvency. It’s a voluntary choice offering directors more influence over the process.
    • Compulsory Liquidation: Triggered when a creditor petitions the court, resulting in the appointment of an Official Receiver as the liquidator. Directors relinquish control in this scenario.

In either scenario, the outcome remains consistent: the company ceases operations, assets are distributed, and unpaid debts are discharged. 

Should you be contemplating liquidation and desire a more in-depth understanding of the process, it’s advised to consult with a licensed insolvency practitioner like ourselves for comprehensive guidance.

Read more:

  • Closing down a business with a bounce back loan

Can I close my business with a Bounce Back Loan?

Yes, you can close a business with a bounce back loan. The only way to legal close down your business is though an insolvency process.

While these loans offer favorable terms, including low interest rates and flexible repayment options, they are still loans that need to be repaid.

If you decide to close your business, you will still be responsible for repaying the loan according to the agreed-upon terms unless the business has been placed into liquidation.

Frequently asked questions

Can I be personally liable if my business defaults on a Bounce Back Loan?

No, there is no need for apprehension regarding personal liability. The absence of a prerequisite for personal guarantees in these loans ensures that borrowers are safeguarded. This assurance is further reinforced by the government's guarantee.

What happens if my business goes into liquidation with a Bounce Back Loan?

What happens if my business goes into liquidation with a Bounce Back Loan?


If a business owner is unable to afford the repayments and cant afford to repay a Bounce Back Loan, contact their lender to explain their situation why you cant afford your repayments and discuss their options. The lender may be able to offer a payment plan that suits the business owner’s needs, such as reduced payments or a temporary suspension of repayments.

If the business owner is still unable to make the repayments, they may want to seek the advice of a insolvency practitioner, who can help them to manage their finances and find a solution that works for them.

Ultimately, the key is to stay in communication with the lender and to seek professional advice early on, before the situation becomes too difficult to manage. Simply complete the online enquiry form or make call 01246 912052 and we will take you though the process.

Insolvency & Restructuring Expert at Business Insolvency Helpline | + posts

With over three decades of experience in the business and turnaround sector, Steve Jones is one of the founders of Business Insolvency Helpline. With specialist knowledge of Insolvency, Liquidations, Administration, Pre-packs, CVA, MVL, Restructuring Advice and Company investment.