Bounce Back Loans have provided invaluable support for many businesses struggling with the effects of the pandemic, allowing many business owners to continue trading during difficult times.
For many businesses, the loan was not enough to keep them afloat, resulting in many business owners looking at starting new companies.
Can I close my business with a Bounce Back Loan?
Yes, you can close your business even if you still have a Bounce Back Loan (BBL); however, you must follow correct procedures to ensure that you don’t fall personally liable for repaying the loan.
If you choose to dissolve your business, you should be aware of the fact that you may be met with objections even if you satisfy the relevant criteria. You will likely receive a letter from Companies House, known as the “Objection to Company Strike Off Notice”.
These letters are a signifier that the company’s house has noticed your request, and are questioning your course of action.
To meet the criteria for voluntary dissolution, you must satisfy the following criteria:
- Your company has not traded or changed names in the last 3 months
- Your company is not threatened with Liquidation
- Your company has no agreements with creditors, such as a Company Voluntary Agreement
If your company does not meet these requirements, you will have to voluntarily liquidate your company instead.
What happens to my Bounce Back Loan when my company is dissolved?
If you have received an objection letter from your lender, HMRC and your creditors, they will each follow set procedures which have to be followed to ensure there has been no fraudulent activities. In some cases, this can involve debt collection agencies conducting their own checks too.
If the BBL was used in the way which was intended, by supporting the company, then there will likely be no issues with the dissolution.
You bank lenders will also have to show that they have done everything they can do to collect the money owed before they can claim on the government guarantee.
If no wrongdoing is found and the banks are able to claim back the loan from the Government, your BBL will be treated as unsecured debt and written off.
Can I transfer a Bounce Back Loan to another business?
In short, no you cannot transfer a Bounce Back Loan to another business.
The purpose and terms of the Bounce Back Loan would not be met. The intention of the loan was to support that particular business and for the funds to be used on business expenditure.
Any transfer out would have two implications:
- The Insolvency Practitioner would treat that transfer out of the business as a loan and would have to pursue the business it was transferred to for repayment.
- The director would be reported for the mis-use of the loan and could face disqualification as a consequence.
Can I close my business with a Bounce Back Loan and use the funds to start another business?
No, you can’t close your business with a Bounce Back Loan and use the funds to start another business. This would not meet the terms of the Bounce Back Loan and could have negative implications for company Directors.
Can I transfer my Bounce Back Loan to another lender?
No, if you are looking to change to a new bank or lender, then your Bounce Back Loan will need to be repaired or retained with your original lender.
A BBL is not transferable to a new finance lender.
Can I start another business after closing down a business with a Bounce Back Loan?
In short, yes you can close a limited company that still has BBL debts and start again; however, there are strict rules that must be followed.
Starting a new company after closing an old one is done in the same manner as starting a completely fresh business. An application will be sent to Companies House and once the new company is on the register, bank accounts and other company necessities can be applied for.
However, there are restrictions on opening a new company, including:
- You cannot reuse the old company’s name for your new company.
- Goods and assets from the old company must be sold at the correct value.
- You may be restricted to new loans depending on how your old business was closed with the unpaid BBL.
- HMRC may require a security deposit .
Can I use money from a Bounce Back Loan for personal reasons?
No, you cannot use the money from a BBL for personal reasons. Although there are no detailed rules on how you can spend the loan, it must be used for the “economic benefit” of your business.
It is strongly advised that you keep written records of how your BBL was spent, with invoices and receipts where appropriate to show where the funds have been spent.
Below are a few example of where the money from a BBL can be spent:
- Staff wages
- Commercial rents
- Supplier payments
- Business expenses and rates
Will a Bounce Back Loan affect my credit score?
As BBLs are classed as unsecured debt, your credit score will not be affected, especially since credit checks are not mandatory in the application of the loan scheme. However, some banks state that they will take defaults in consideration for loan applications in the future.
If the loan has not been used for the benefit of the business and you have been found personally liable, this can affect your credit score.
At The Insolvency Experts, our team of expert advisors are here to provide you with the help and advice you need during challenging financial times. We will take the time to assess your situation and help you to understand all the options open to you.
Contact us today to see how we can help you.