Unable to to pay back bounce back loan

[xray123]

I have taken 40k bounce back loan on one of my LTD businesses which isn't doing well due to covid. I want to know what are the reprecussions of defaulting?

I have other LTD businesses that bank with the same bank - would this affect them if I default on the loan for the failing business?

How would it affect me personally? credit rating, current account with the bank that i have the bounce back loan with, will my assets be in danger.

 

[Alan]

try
https://www.british-business-bank.c...nce-back-loans/faqs-for-small-businesses/#f16

 

[Ian J]

I have other LTD businesses that bank with the same bank - would this affect them if I default on the loan for the failing business?

Possibly as it depends on what documentation you signed when setting up the banking arrangements

 

[Gordon - Commercial Finance]

Its starting already? Surely the first payment is still 9 months away??

 

[cts1975]

Its starting already? Surely the first payment is still 9 months away??

Exactly - this forum will be full of 'How do I close my business now I've spent my bounce back loan?' in 8/9 months time.
The bounce back loans will be play a big part in the financial legacy of Cov19.

 

[UKSBD]

Its starting already? Surely the first payment is still 9 months away??

That gives people enough time to find out how to extract the money from the company legally.

 

[UK Contractor Accountant]

will my assets be in danger.

company assets - yes. They will need to be sold to pay liquidator/creditors etc if the company goes belly up.

 

[Mark T Jones]

Simple answer, they can't directly come to you or your other businesses for the BBL. It will, however definitely affect any banking relationships you may have

 

[Gordon - Commercial Finance]

Exactly - this forum will be full of 'How do I close my business now I've spent my bounce back loan?' in 8/9 months time.
The bounce back loans will be play a big part in the financial legacy of Cov19.

fully expected this in 8 or 9 months time yes, but the audacity of p*$hing £40k up the wall within 3 months and already knowing it’s never going to be paid back is outrageous....

 

[jimbof]

On paper the limitation of liability should prevent the actual liability for the bounce back loan debt transferring (though if you've got other guarantees in place with the bank like overdraft personal guarantee etc you maybe on the hook for them). Of course if you've behaved improperly with the bounce back loan there may be reckoning over that (like if you've increased director salaries, paid out illegal dividends, etc). But that would be HMRC or some other arm of Govt, not the bank.

I guess the bank could "legitimately" tell you they don't want to deal with the other businesses any more if they are aware of the links, and summarily close the accounts.

If you were really unlucky they might decide the other businesses need investigating for fraudulent activities and freeze the accounts while they satisfy themselves...

 

[Ian J]

How would it affect me personally? credit rating, current account with the bank that i have the bounce back loan with, will my assets be in danger.

You should know the answer as it seems that you've shafted HMRC and others already for significant amounts according to your post of seven years ago

 

[Paul Norman]

The business, clearly, will be bankrupt.

The bank - and any other creditors - have the right to know whether anything improper was involved, which will include looking at any monies drawn down to pay yourself.

And yes, it is likely that it will have an impact on your relationship with the bank.

But you do have a few months to attempt to fix it.

 

[Lisa Thomas]

The Company may well be insolvent - you should consider seeking advice from an insolvency Practitioner to explore options.

 

[Mr D]

5 months on - must admit that is a shorter timescale for business than some of us were expecting.

As Lisa says get professional advice. Usually free for initial consultation and at least will have one or more options - possibly even ones you can't see for the problems.

There will be more, likely many more, still to come in next 12 months or so.

Advice I had from business debtline 4 years ago was move all other business and personal accounts away from the bank I was going to annoy. They weren't saying the bank would steal money but if a problem like taking money or freezing accounts occurs its harder to sort out knock on effects afterwards. Having no other accounts in the same bank means problems could not be encountered.

 

[Red Wood]

Let's be frank everybody. When a biz goes pop, any unsecured creditors usually get a big fat ZERO. I have never heard of any entity successful chasing directors for the debt under even when evidence is as clear as day they were trading either insolvent or illegally.

Fold the company, ignore the letters. They won't come after you for the BBL.

If you have already 'lost' some of HMRC's before as a previous poster in this thread suggests, I'd say its time to find a job and start paying back into the public purse.

 

[Aniela]

Fold the company, ignore the letters. They won't come after you for the BBL.

I feel this early on, they would go after him for the BBL.

It's when the masses of businesses start failing when the repayment period starts; that they will likely do the whole "Can you pay any back?" "No?" "OK. Enjoy the tax payers money you spent. Have a great day."

 

[Talay]

I feel this early on, they would go after him for the BBL.

It's when the masses of businesses start failing when the repayment period starts; that they will likely do the whole "Can you pay any back?" "No?" "OK. Enjoy the tax payers money you spent. Have a great day."

Perhaps but if they still have the funds, then surely they did not need them and if the funds have already been depleted and business has not improved, then they must consider closure now.

There is no rational reason why the limited BBL funds should have provided a largesse which extends well past the point where repayments need to be made.

For your sweetshop entrepreneur, I would agree that £50k should last a long time but a company with 50 people o the payroll could get through £50k in weeks.

 

[Aniela]

Perhaps but if they still have the funds, then surely they did not need them and if the funds have already been depleted and business has not improved, then they must consider closure now.

There is no rational reason why the limited BBL funds should have provided a largesse which extends well past the point where repayments need to be made.

For your sweetshop entrepreneur, I would agree that £50k should last a long time but a company with 50 people o the payroll could get through £50k in weeks.

If they have gone through the funds this quickly, then it's extremely likely the business wasn't viable for the near future in the first place, and they should never have been loaning money.

 

[Paul FilmMaker]

5 months on - must admit that is a shorter timescale for business than some of us were expecting.

As Lisa says get professional advice. Usually free for initial consultation and at least will have one or more options - possibly even ones you can't see for the problems.

There will be more, likely many more, still to come in next 12 months or so.

Advice I had from business debtline 4 years ago was move all other business and personal accounts away from the bank I was going to annoy. They weren't saying the bank would steal money but if a problem like taking money or freezing accounts occurs its harder to sort out knock on effects afterwards. Having no other accounts in the same bank means problems could not be encountered.

Depressingly soon.

 

[jimbof]

For your sweetshop entrepreneur, I would agree that £50k should last a long time but a company with 50 people o the payroll could get through £50k in weeks.

You'd expect companies of any significant sort of size with significant requirements to be more likely to have taken out a CBILS than a BBLS. There'd literally be no point taking a BBLS in the current situation if you'd "get through it in weeks" as it's clear to anyone that if you're business really needs the support, you're going to need it for much more than a few weeks.

 

[Opinion87]

If they have gone through the funds this quickly, then it's extremely likely the business wasn't viable for the near future in the first place, and they should never have been loaning money.

Plenty in the hospitality industry that were perfectly viable that are being hit harder than post.

 

[Mr D]

You'd expect companies of any significant sort of size with significant requirements to be more likely to have taken out a CBILS than a BBLS. There'd literally be no point taking a BBLS in the current situation if you'd "get through it in weeks" as it's clear to anyone that if you're business really needs the support, you're going to need it for much more than a few weeks.

BBL was apparently a lot easier to get.

However there are businesses that - back in May - were still looking at being viable and once reopened could have made a darn good go of things.
Then delays, delays and more delays in being able to open. Then tier system. Then lockdown.
For say a pub, a nightclub, a gym or a small hotel - the sum could be gone through quick while both having the cost of becoming compliant with covid requirements and then loss of custom without loss of expenses.....

Even a lot of retailers may fold - having to shut for their 2nd busiest month of the year for sales, possibly even for their busiest month too (next month) - do we honestly believe based on the concept of lockdown-lite we will see infections reduced enough in just 4 weeks?
Busy sales periods are often used to get a business through its quieter sales periods. Like spring and summer.

 

[Paul FilmMaker]

BBL was apparently a lot easier to get.

However there are businesses that - back in May - were still looking at being viable and once reopened could have made a darn good go of things.
Then delays, delays and more delays in being able to open. Then tier system. Then lockdown.
For say a pub, a nightclub, a gym or a small hotel - the sum could be gone through quick while both having the cost of becoming compliant with covid requirements and then loss of custom without loss of expenses.....

Even a lot of retailers may fold - having to shut for their 2nd busiest month of the year for sales, possibly even for their busiest month too (next month) - do we honestly believe based on the concept of lockdown-lite we will see infections reduced enough in just 4 weeks?
Busy sales periods are often used to get a business through its quieter sales periods. Like spring and summer.

True that. This constant death-by-a-thousand-cuts killing us off. I work on corporate filming projects and we had a huge project in November which is now gone. It would've been an awesome, mind-blowingly incredible quarter but hey ho.

Also, what's really strange is we're up against 'zombie' competition. For example, there's this one, big firm in our sector racking up massive losses every month. They've got rid of staff and are selling off kit but the only thing that's holding up their corpse is government loans. So all us little firms are competing with a dead business that should be out of our way but it'll still survive for a few months because of government support.

If it just died, we'd all be better off because us smaller, nimbler, healthier firms will be able to win the business we need to make it through this mess. That's if the government stops subsidising these zombie businesses.

 

[Mr D]

True that. This constant death-by-a-thousand-cuts killing us off. I work on corporate filming projects and we had a huge project in November which is now gone. It would've been an awesome, mind-blowingly incredible quarter but hey ho.

Also, what's really strange is we're up against 'zombie' competition. For example, there's this one, big firm in our sector racking up massive losses every month. They've got rid of staff and are selling off kit but the only thing that's holding up their corpse is government loans. So all us little firms are competing with a dead business that should be out of our way but it'll still survive for a few months because of government support.

If it just died, we'd all be better off because us smaller, nimbler, healthier firms will be able to win the business we need to make it through this mess. That's if the government stops subsidising these zombie businesses.

That applies in multiple sectors.
Kill off the zombie business that cannot run and the customers that exist will utilise other businesses for services or goods.
Sure, bad for the owners and staff of those zombies. Short term pain for them, long term gain for the others.

Zombie businesses kept afloat only by state help - eventually the state help stops.

Trouble for the state is that lots of businesses that could survive long term look the same as those zombies at the time help is given.
Back in march, April, may - hard to predict who could survive and prosper with just a bit of help then.
Turns out the 3 weeks of lockdown was incredibly long for some businesses - gyms, swimming pools, nightclubs....

 

[jimbof]

BBL was apparently a lot easier to get.

However there are businesses that - back in May - were still looking at being viable and once reopened could have made a darn good go of things.
Then delays, delays and more delays in being able to open. Then tier system. Then lockdown.
For say a pub, a nightclub, a gym or a small hotel - the sum could be gone through quick while both having the cost of becoming compliant with covid requirements and then loss of custom without loss of expenses.....

True, it was easier. But pointless if what you actually needed was the CBILS. In fact worse than pointless really if the BBLS ends up being an impediment to the CBILS (as you're only supposed to have one, and you have to certify around that when you take the CBILS or BBLS).

A company I'm aware of looked at the BBLS scheme, thought it would be ideal if it wasn't so little money (a lot less than 50 employees mentioned in the example I was replying to), and got a CBILS instead which would see them right til well into next year. That's the way you manage a successful business.

I'm sorry, but any business owner looking at it and evaluating their needs and thinking they only needed a few weeks money (which maxed out the BBLS) in this situation (again, the specific straw man I was referring to) would have been deluded as the writing has been on the wall for a long time that this was not a quick blip.

 

[Mr D]

True, it was easier. But pointless if what you actually needed was the CBILS. In fact worse than pointless really if the BBLS ends up being an impediment to the CBILS (as you're only supposed to have one, and you have to certify around that when you take the CBILS or BBLS).

A company I'm aware of looked at the BBLS scheme, thought it would be ideal if it wasn't so little money (a lot less than 50 employees mentioned in the example I was replying to), and got a CBILS instead which would see them right til well into next year. That's the way you manage a successful business.

I'm sorry, but any business owner looking at it and evaluating their needs and thinking they only needed a few weeks money (which maxed out the BBLS) in this situation (again, the specific straw man I was referring to) would have been deluded as the writing has been on the wall for a long time that this was not a quick blip.

Is a BBL you can get a better option than a CBIL you know you will get turned down for?
Pretty much guaranteed lump sum versus weeks of waiting only to be turned down. Is it really that hard a choice?

Remember back in May - CBILs were taking time and some people who needed the money were turned down - perhaps quite rightly in the eyes of the lender.
With their own money on the line and a looming recession the banks would be conservative in their lending.
With government backing a scheme 100% then its easy to chuck money out into the economy.

 

[Gordon - Commercial Finance]

I can confirm that a lot of bigger businesses which needed CBILS either gave up or were turned down and took BBL because it was better than nothing.