How To Close A Limited Company With A Bounce Back Loan (2026 Guide)

• The content on this page has been written by Robert Moore and approved by Chris Ferguson Licensed Insolvency Practitioner and Director of RMT Recovery & Insolvency

Can a Bounce Back Loan (BBL) Be Written Off?

Yes. A Bounce Back Loan is an unsecured debt. If your company is insolvent and cannot pay it back, the loan is legally written off through Creditors’ Voluntary Liquidation (CVL). Attempting to “strike off” a company with a BBL is now almost universally blocked by lenders and HMRC, often triggering a formal investigation into your conduct.

The Only Legal Way to Close: Liquidation vs. Dissolution

In the current enforcement landscape, the distinction between a solvent “strike-off” and an insolvent “liquidation” is absolute.

The Dissolution Route (Form DS01)

Dissolution is intended only for companies that are entirely debt-free and dormant.

• The Reality: If your company has an outstanding BBL of any size, it is technically insolvent.
• The Risk: Lenders now use automated systems to object to any strike-off where a BBL is detected. Furthermore, the Rating (Insolvency Service) Act allows the government to investigate directors of dissolved companies for up to six years after closure. If they find an unpaid BBL was “dissolved away,” they can restore the company and hold you personally liable.

The Liquidation Route (CVL)

This is the correct legal process for any company that cannot repay its BBL. It is handled by a Licensed Insolvency Practitioner (IP) and provides you with a “clean break.” Once the liquidation is complete, the BBL is legally extinguished, and your conduct is formally reported as compliant.

The Creditors’ Voluntary Liquidation Process

Modern liquidation is efficient. At CompanyRescue, we utilize the Deemed Consent process, allowing most small-business closures to be completed without the need for physical meetings.

1. Board Meeting: Directors resolve that the company is insolvent and needs to close.
2. Appointing the IP: You appoint a Licensed IP (like our Managing Director, Chris Ferguson) to handle the legal requirements and creditor communications.
3. The 14-Day Notice: We notify all creditors, including the BBL lender. If no objections are raised within 14 days, the liquidation officially begins.
4. Finalization: Assets are realized (if any), the IP files a final report, and the company is removed from the register. The BBL debt ends there.

What Happens to the BBL Debt?

In a liquidation, debts are paid in a strict Order of Priority.

As an unsecured debt, the BBL lender is near the bottom of the list. They sit behind the Liquidator’s fees, secured creditors, and HMRC (who hold secondary preferential status). In most cases, there are insufficient funds to reach the unsecured creditors. Because the loan is 100% government-guaranteed, the bank simply claims the loss from the government once the liquidation is finalized, and the matter is closed.

What About Personal Liability?

While there is no personal guarantee on a BBL, you can still be held liable if the funds were misused. The Insolvency Service is currently focusing on three specific breaches:

• Personal Use: Using BBL funds to pay personal debts, buy luxury goods, or fund a personal mortgage.
• Preference Payments: Paying back a loan to a friend or relative while leaving the BBL or HMRC unpaid. These can be challenged for up to 20 years.
• Application Fraud: Falsifying 2019 turnover figures to obtain a higher loan amount than the business was entitled to.

Our Stance: If you used the BBL for business costs—including your own reasonable salary—you are generally safe. The investigation is designed to identify abuse, not to punish directors whose businesses failed despite their best efforts.

Why You Must Act Now

Doing nothing leads to Compulsory Liquidation. This is where a creditor (often HMRC) petitions the court to wind you up. This process is more aggressive, you lose control over the timing, and the Official Receiver’s investigation into your BBL usage will be much more stringent.

Don’t wait for the bank to take the lead. Would you like us to look at your specific BBL balance and usage to see if you qualify for a standard CVL?