If you receive a Bounce Back Loan Demand Letter from the bank, it means that the bank is requesting that you pay back the full amount of the Bounce Back Loan that you received.
The Demand Letter will specify the amount of the loan, the repayment terms, and any fees or interest that may be due. It is important to carefully review the Demand Letter and understand your obligations under the loan agreement.
If you are able to pay back the loan as requested, you should do so in a timely manner to avoid any additional fees or interest. If you are unable to pay back the loan as requested, you should contact the bank as soon as possible to discuss your options.
This may include negotiating a new repayment plan or seeking financial assistance. It is important to act promptly and communicate with the bank to avoid any negative consequences, such as damage to your credit score or legal action.
What you should do if your bank has issued a Bounce Back Loan demand letter
If your bank has issued a Bounce Back Loan demand letter, it is important to take immediate action to address the situation. The first step you should take is to carefully review the demand letter and understand your obligations under the loan agreement. Make sure you fully understand the amount of the loan, the repayment terms, and any fees or interest that may be due. It is also important to verify that the demand letter is legitimate and not a scam.
Once you have a clear understanding of the situation, you should consider your options for repaying the loan. If you are able to pay back the loan as requested, you should do so in a timely manner to avoid any additional fees or interest. If you are unable to pay back the loan as requested, you should contact the bank as soon as possible to discuss your options. This may include negotiating a new repayment plan or seeking financial assistance. It is important to act promptly and communicate with the bank to avoid any negative consequences, such as damage to your credit score or legal action.
Are banks speculatively sending out these demands for payment?
It is not uncommon for banks to issue demand letters for unpaid Bounce Back Loans, as the bank is entitled to request payment of the loan according to the terms of the loan agreement we have seen a number of letters from Santander and Barclays. The demand letter serves as a formal notice to the borrower to clarify their turn over was correct or that the loan is past due and the bank is requesting immediate payment. It is important to note that the issuance of a demand letter does not necessarily mean that the bank is acting in a speculative or irresponsible manner.
Rather, the demand letter is a routine part of the loan repayment process and is intended to ensure that the borrower is aware of their obligations and takes action to pay back the loan as agreed. However, if you believe that the demand letter was issued in error or that the bank is acting unfairly or improperly, you may want to seek the advice of a financial advisor to help you understand your rights and options.
Directors aren’t typically liable for business loans
As a general rule, directors of a company are not personally liable for the company’s debts, including Bounce Back Loans. This means that the directors are not personally responsible for paying back the loan if the company is unable to do so. Instead, the company’s assets are typically used to pay off the loan, and the directors are not required to use their personal assets to satisfy the debt. However, there are some exceptions to this rule.
For example, if the directors have personally guaranteed the loan, they may be held personally liable for the debt. In addition, directors may be held personally liable if they have engaged in fraudulent or illegal activities, or if they have breached their duties as directors and caused harm to the company. It is important for directors to understand their legal obligations and to act in the best interests of the company in order to avoid personal liability.
Read more: Unable to Repay a Bounce Back Loan
What can you do if you have received a letter?
If you have received a letter from your bank requesting you to clarify your turnover, some state that you will be reported to HMRC if you fail to do so, this will put you in a tricky situation.
Should feel you have made an error by taking out a bounce back loan and over stated your turnover, what can be done if your bank is investigation your bounce back loan application:
There are several ways to repay a bounce business loan:
- Pay off the loan in full: If you have the funds available, you may be able to pay off the loan in full ahead of schedule. This can save you money on interest and may be a good option if you are able to secure a lower interest rate on another loan.
- Refinance the loan: If you are unable to make the required payments or if you can secure a lower interest rate, you may be able to refinance the loan. This involves taking out a new loan to pay off the old one and may involve different terms and conditions.
- Use a debt management plan: If you are having difficulty making your loan payments, you may be able to work with your lender to develop a debt management plan. This could involve modifying the terms of your loan, such as extending the repayment period or lowering the interest rate.
- Sell assets: If you have assets that are not essential to the operation of your business, such as equipment or real estate, you may be able to sell them to generate funds to pay off your loan.
- Seek out investors: If you are unable to repay the loan on your own, you may be able to find investors who are willing to provide the necessary funds in exchange for a stake in your business.
- Negotiate with your lender: If you are having difficulty making your loan payments, you may be able to negotiate with your lender to find a solution that works for both parties. This could involve modifying the terms of the loan or seeking out alternative repayment options.
- Instruct an insolvency practitioner: If you feel that there is no way you can repay the amount outstanding you can instruct an IP who can carry out a liquidation of the company. This would stop any further recovery action by the lender against you.
Conclusion
A Bounce Back Loan Demand Letter is a document that is sent by a bank to a borrower who has received a Bounce Back Loan, a type of government-backed loan designed to help small businesses impacted by the COVID-19 pandemic. The Demand Letter typically outlines the terms of the loan and the borrower’s obligations, including the amount borrowed, the interest rate, the repayment period, and any fees or charges associated with the loan.
It may also include a reminder of the borrower’s responsibility to make timely payments and a warning that failure to do so could result in default and legal action. The Demand Letter may also provide information on the borrower’s options for repaying the loan, such as refinancing or modifying the terms of the loan. It is important for borrowers to carefully review the Demand Letter and to seek legal or financial advice if they have any questions or concerns about their obligations under the loan.
Read more: What to do if HMRC investigate your Bounce Back Loan
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.