Bounce Back Loans were introduced as a lifeline for many struggling businesses during the pandemic. However, for many companies, the scheme was simply not enough to keep them afloat.
This is still an issue many businesses are still facing, with trading uncertainties affecting how they operate. If you are struggling with loan repayments, you won’t be alone.
Will the lender contact me if I default on a Bounce Back Loan?
Yes, if you have defaulted on a Bounce Back Loan (BBL) repayment, you can expect to hear from your lender a few days after.
Different lenders will each have their own processes in place to collect debt and how they deal with their borrowers. However, in general, when you have defaulted on a payment, your lender will be in contact with you to discuss the situation.
When will the lender contact me once I’ve defaulted on a Bounce Back Loan?
Usually your lender will contact you a few days after you have defaulted, just like they would with any other unsecured loan.
The sooner you pay off your loan once interest is charged, the less likely you are to be chased by your lender, and the less it will cost you overall.
What will happen if I default on my Bounce Back Loan?
Missing a repayment towards your BBL, known as defaulting on your loan, should be taken seriously. Although BBLs were secured by the government, the responsibility for making the monthly repayments lie solely with your company.
If your company defaults, lenders will take action to and use their usual collection methods to obtain unsecured loans. This may involve dealing with debt collectors, court action and potentially bailiffs.
Realistically, if your company isn’t in a position to be able to make the initial repayments, then it’s likely that your company is insolvent. If you suspect this is the case for your business, you should seek professional insolvency advice straight away.
What happens if I default on my Bounce Back Loan as a sole trader?
Unfortunately, as a sole trader, if you cannot repay your BBL, you do not have the same protection as a limited company does. Legally speaking, there is no distinction between personal and business assets, meaning that you are personally liable for the amount owed.
While no recovery action can be taken against your personal home or vehicle, you can still be pursued for outstanding defaults and your personal assets may be at risk of recovery action.
Can my Bounce Back Loan lender take me to court?
Since a BBL is the same as any other unsecured loan, the lender will look to recoup the money by a range of means. Banks have recovery teams in place who will be in touch with you on a regular basis if you default on the repayments.
Although short term fixes may be possible, if you continue to miss payments, the action from your lender will be ramped up. This may include contact from debt collectors, and you may be threatened with a County Court Judgement (CCJ), which can entail bailiffs seizing company goods as a form of debt repayment.
Can I close a company after defaulting on a Bounce Back Loan?
As we’ve mentioned, if you are defaulting on your BBL repayments, it is likely that your business is insolvent. If this is the case, you will have to liquidate your company through a Creditors Voluntary Liquidation (CVL).
Some businesses simply cannot recover from the effects of the pandemic, even with the help of a BBL, and the recovery of the business may not be realistic.
Read our guide on liquidating your business with a BBL to find out more.
How can I avoid defaulting on my Bounce Back Loan?
There are a few ways you can avoid defaulting on your BBL, including:
- Prioritise making your loan repayments.
When it comes to managing your business’s finances, making your loan repayments should be one of the top priorities.
Try setting up automatic payments and if possible, consider paying extra each month so you can pay off your loan ahead of schedule.
- Create a realistic budget.
If you can work around the monthly payments of our BBL, outlining your monthly income and expenses, this should help you cut down costs in other areas so you are guaranteed to have enough money for the repayments.
- Look into the Pay As You Grow (PAYG) scheme.
This scheme was introduced by the government to help borrowers with their repayments. There are three options to choose from, with the scheme acting as a way to reduce your monthly repayments.
If you’re worried about defaulting on your BBL repayments, or fear you may encounter difficulties in the future, it is vital that you seek expert guidance at the earliest point possible.
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 understand all the options open to you.
Contact us today to see how we can help you.