Can’t repay CBILS or Bounce Back loan? Here’s what you can do

Many businesses have had a difficult time during the COVID-19 pandemic. It’s important to remember that there is support available for you should you struggle to repay loans from government aid schemes.

Here we discuss what your options are should you be unable to repay your Coronavirus Business Interruption Loan Scheme (CBILS) or Bounce Back Loan Scheme (BBLS) and how this might affect your business in the future.

 

Contents

• What is the Coronavirus Business Interruption Loan Scheme (CBILS)?
• What is the Bounce Back Loan Scheme (BBLS)?
• When does CBILS and BBLS end?
• What happens if my company can’t repay CBILS or BBLS?
• Options for Limited Companies that can’t afford to repay CBILS
• Options for Individuals and Sole Traders that can’t afford to repay CBILS

 

What is the Coronavirus Business Interruption Loan Scheme (CBILS)?

The Coronavirus Business Interruption Loan Scheme (CBILS) is a scheme that provides UK government funding for viable SMEs experiencing cash flow issues due to the COVID-19 pandemic.

The scheme was introduced to provide emergency relief for struggling businesses in order to help them stay afloat during the height of the pandemic and subsequent forced closures.  

What is the Bounce Back Loan Scheme (BBLS)?

The Bounce Back Loan Scheme (BBLS) is another UK government scheme that provided financial support to businesses that were losing revenue as a direct result of the Coronavirus pandemic.

This scheme targeted businesses, mainly SMEs, who would see benefit from a smaller influx of cash as opposed to taking out a large outright loan.

 

When does CBILS and BBLS end?

Both the Coronavirus Business Interruption Loan Scheme and the Bounce Back Loan Scheme have now ended. These schemes closed on the 31st March 2021.

The loans are available for terms of up to 6 years, so businesses do have time to recover post-pandemic and pay off the loan in manageable increments.

It’s important to note the repayment terms and conditions for both these schemes:

CBILS

• Available on terms of up to 6 years.
• First 12 months are interest-free.
• 12-month Capital Repayment Holiday.
• No early repayment fee.
• UK government provides lenders with a guarantee of 80% of the loan amount.

 

BBLS

• Available on a fixed, 6 year term.
• Interest is fixed at 2.5%.
• 12-month Capital Repayment Holiday.
• No early repayment fee.
• UK government provides lenders with a guarantee of 100% of the loan amount.

Will CBILS be extended?

The CBIL scheme will not be extended and has ceased taking applications. If you have missed the deadline for loan applications, you can take advantage of the government’s replacement aid, the Recovery Loan Scheme.

This scheme is available to apply for up until the 31st December 2021, subject to government review. 

 

What happens if my company can’t repay CBILS or BBLS?

First of all, don’t panic. The Government is of course aware of the fact that struggling businesses would take advantage of this loan and as a result, made the terms manageable for recovering businesses post-pandemic.

If your business took out a loan under £250,000, you wouldn’t have needed a Personal Guarantee so aren’t classed as fully responsible for the loan. If you did provide a Personal Guarantee, you’ll be responsible for only 20% of the CBILS loan and will need to assess your repayment options.

 

Options for limited companies that can’t afford to repay CBILS

If you are a limited company, you have a few options should you start to struggle with CBILS repayments.

 

Company Voluntary Arrangement (CVA)

You could take advantage of a CVA if there’s enough evidence to suggest that your business would be viable without having to deal with the loan payments. A CVA can help to cover unsecured debts, such as CBILS or BBLS, and allow for manageable monthly repayments on terms suitable to your circumstances.

Company Administration

If you cannot pay your debts as and when they fall due, then Company Administration may be an option. In this case, the administrators would take control of the running of the company and seek a purchaser for the business and assets with a view to safeguarding jobs and keeping the business’s doors open.

Creditors’ Voluntary Liquidation (CVL)

If your debts are beyond the point of return and you are struggling with a Personal Guarantee, you may have no option but to have the company wound down and liquidated, using the sale of the assets to repay outstanding debts.

It is important to note however, that you must not use a CVL as a way out from your debts. If your business has at any point benefited from the CBILS or BBLS loans, you may be investigated for misconduct and further legal action will be taken against you personally.

 

Options for individuals and sole traders that can’t afford to repay CBILS

A sole trader could only apply for a Bounce Back loan and not CBILS. You will therefore have a 100% guarantee from the government against the loan, so should be able to make small repayments to cover the loan.

There is an option to use an Individual Voluntary Agreement (IVA) which is similar to a CVA in the sense that monthly, affordable repayments are agreed upon based on your current financial situation.

 

How can The Insolvency Experts help with the Coronavirus Business Interruption Loan?

In any case, it’s important that you contact an expert Insolvency Practitioner should you begin to struggle with repaying CBILS or BBLS to avoid future problems.

Most importantly, you need to keep in mind these important facts:

 

• Don’t run down any leftover funding you may currently have from the CBILS or BBLS loans should you be concerned about your repayment abilities.

• You cannot simply liquidate your company and move on without professional input. If you do, you risk being investigated for misuse of funding and could see yourself in legal trouble.
• You must get in touch with financial experts, such as ourselves, to help you understand your next steps and plan how your business can return to profitability in the future.

 

If you are worried about your business’s ability to repay these government loans, please get in touch with us today and we can advise you on the next steps to take.