What Directors Need To Know About Bounce Back Loans

A bounce back loan was a loan offered by the government amid the Coronavirus pandemic, to help small businesses gain access to fast track, ‘emergency’ finance, borrowing between £2,000 and £50,000.  Now that we are recovering from the pandemic and the loans are starting to be repaid there are a number of questions that directors are asking.   

However, be clear that if you cannot pay these loans back, or they are unaffordable, then you must act.

Serious questions are being asked by the government and the banks as to whether the money has been spent wisely. Pressure will be applied to directors that have taken money out of the company unreasonably given the loans were designed to help the companies "bounce back".

The banks are only going to get the money back from the government if they can demonstrate that they have done everything in their power to recover the loans, such as legal threats. If that fails, then realistically, only a terminal insolvency event, i.e liquidation, can demostrate to the government that they have tried everything due to the powers of the liquidator/administrator to investigate where the money has gone and the conduct of the directors.  This is why attempts to dissolve companies will not be successful.

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