What if i can’t repay my bounce back loan?

Can I apply for a second bounce-back loan?

Yes, you can top up your existing bounce back loan if you originally borrowed less than the maximum amount available.

However, as of November 10, 2020, you will not be able to apply for a second, separate bounce-back loan from your existing lender or from any other lender.

How Many Bounce Back Loans Can I Have?

You can only top up with your existing BBLS lender. A borrower can apply for a top-up that is less than £ 50,000, or 25 percent of the annual sales certified on your original successful bounce back loan application form, minus the value of your original loan.

Bounce Back Loan Top-ups

Under the bounce back loan scheme, if a borrower certified £ 100,000 in annual sales in their original application and has taken out a bounce back loan of £ 20,000 (20 percent of that certified annual turnover), they can apply for an additional £ 100,000 loan 5,000 (5 percent of this certified annual turnover), whereby the bounce-back loan amounts to a maximum of 25 percent of the originally certified annual turnover.

Different sales amounts confirmed in original loan applications and the different sizes of original loans mean that the size of the top-up available to applicants will be different.

However, the minimum top-up amount is £ 1,000.

How Bounce Back Loan top-ups work

Certified annual sales for original credit Total amount available under BBLS (25% of sales) Original repayment amount Bounce Back Loan Top Up *
example 1 200,000 50000 50000 0
Example 2 200,000 £ 10.00 each 10,000 40000
Example 3 150000 30000 30000 7500
Example 4 100,000 20000 20000 5000
Example 5 50000 10,000 10,000 2500
Example 6 20000 4000 4000 1000
* Total amount minus the original loan amount

Source: British Business Bank

How do I apply for a top-up on the bounce-back loan?

You fill out a short form application form from your existing lender. Borrowers must complete this application form to receive a top-up.

The Refill Application Form requires you to indicate the amount of the refill requested and re-submit certain declarations that were included in the original Bounce Back Loan Application Form.

> See also: Which banks offer bounce-back loans? – how to find a BBL lender

How long do I have to repay my bounce back loan?

The standard repayment period on a bounce-back loan is five years, which is one year after the loan is deposited into your bank account if the one-year government-paid interest-free period has expired.

After 12 months, according to your agreement, you will pay 2.5 percent interest regardless of the amount you borrow.

What if it takes me longer to pay interest?

You can add an additional six months to the time before you need to start repaying your bounce back loan. This means that you have 18 months before you start paying the interest. However, the interest is calculated from the 12th month onwards, so you end up paying more.

You can also extend your loan period beyond the usual six years to ten. The government says this could cut monthly repayments by almost half, but you’ll end up paying more than 2.5 percent interest.

The sooner you pay back your loan, once interest has been charged, which you can do with no penalty, the less it will cost you overall.

> See also: Bounce Back Loan Repayment Calculator – How Much Does Your Loan Cost?

What if i can’t repay my bounce back loan?

The government is preparing so that two-thirds of the bounce-back loans will never be paid back. According to the National Audit Office, £ 26bn of the £ 45bn bounce-back loan granted so far will never be repaid.

According to the Business Banking Resolution Service (BBRS), just over 40 percent of companies that have taken out a government-guaranteed emergency coronavirus loan have no intention of repaying it – either because they don’t expect to repay their Bounce Back Laon, or because they don’t believe the government will pursue the debt.

The Association of Accounting Technicians has stated that writing off the £ 45 billion worth of bounce-back loans issued to date will be more effective in the long run than chasing down debts that will never be paid back.

Writing off the entire £ 46 billion bounce-back loan would save the government £ 1 billion in business interruption payment (GDP) fees alone, the AAT said.

And ex-Chancellor George Osborne agreed that all Covid-19 financial emergencies should be written off.

In the meantime, the lenders themselves are ready to cut plans to set up a separate agency to track bad bounce-back loan debt and handle overdue payments themselves.

Technically, there aren’t any serious ramifications of using your Bounce Back Lona by default. You won’t lose a fortune – lenders are prohibited from asking for a personal guarantee or charging a fee on your home or personal vehicle. And it doesn’t affect your creditworthiness either (credit checks aren’t mandatory for the loan program).

However, banks will pursue you for unpaid bounce back loans in the same way that they would try to get back other unsecured loans. This can include dealing with debt collection agencies, which means threatening letters, legal action, and possibly bailiffs if you fail to pay

> See also: Banks can call in debt collection agencies to get back unpaid bounce-back loans

The government and banks have discussed the creation of a body of debt collection agencies, all of which would follow an agreed code of conduct. This is because lenders cannot get a 100 percent government guarantee until a debt collection agency has exhausted the repayment.

However, when it comes to bounce back loans and bad debts, banks will be wary of bad press. Personal and business accounts are often littered with micro-businesses. And they won’t want a replay of the Royal Bank of Scotland’s infamous Global Restructuring Group, which was denounced for tricking small business customers into selling and tracking down their businesses.

What happens to the bounce back loan if the company goes bankrupt?

Typically, when a company goes into liquidation, any personal guarantees that you as a director may have signed to secure funding will come due. Thereafter, as the managing director, you are personally liable for these amounts.

A bounce back loan is an unsecured debt. If the company has to liquidate, the lack of personal guarantees related to the loan means that it will be treated as an unsecured debt. Unsecured debts are rarely paid in full on liquidation. In this case, the lender will pursue the government for full repayment as the bounce back loan is secured by the government. Unsecured debts are written off after the company is liquidated so you are not personally liable. The responsibility for repaying the bounce back loan rests solely with the company. Liability will not be transferred to you as a director or any other shareholder provided that you have fulfilled your duties as a director.

This means there is no risk to your personal assets or creditworthiness in the event your bankrupt company fails to repay the bounce-back loan.

However, during liquidation, a liquidator examines your company’s financial history before and during the bankruptcy. If he finds evidence that you improperly used your bounce back loan, he could hold you personally liable for the debt.

Read on about bounce back loans

Government Bounce Back Loan for Your Small Business

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