My company can’t afford its Bounce Back Loan repayments – am I personally liable?

The Bounce Back Loan Scheme turned one year old on 4 May 2021. This means the initial 12-month repayment-free period has now come to an end, or will be ending imminently, and businesses will have to start making repayments on these loans.

Directors should be factoring repayments into forecasts, if they haven’t done so already, to ensure that sufficient funds are available to meet repayments. But what if funds generated from trade are insufficient to cover repayments? Can directors be personally liable to repay their company’s Bounce Back Loan?

The short answer is no. Bounce Back Loans come with no personal guarantees. This means if your company is unable to repay the loan in full, the lending bank will claim 100% of its loss through the Government guarantee once it has taken all possible steps to pursue the company only for the debt. 

This means that in normal circumstances a director’s personal assets are not at risk if their company cannot repay its Bounce Back Loan.

However, this is on the assumption that:

• Your application for the loan was not fraudulent and your company met the criteria to apply for the loan in the first place;
• The funds were used for your company in accordance with the loan agreement; and 
• The directors have not breached any of their statutory or fiduciary duties or, in circumstances where the company enters into an insolvency process, that the directors have not committed any offences under the Insolvency Act

If you are struggling to keep up with Bounce Back Loan repayments or any other debts then early financial advice is recommended. There are a number of options available to rescue or restructure your company without the need for closure and liquidation; early and proactive advice maximises the number of options available to do this.

If you would like a free initial meeting to discuss your options and come to a solution to deal with your debts, contact a member of the PKF Francis Clark Business Recovery team.