What happens if you can’t pay back a bounce back loan?
Keep reading because I will share everything you need to know.
My first business failed and I ended up with £50,000 in personal debt. It hit my credit rating and impacted me for many years, it takes a while to recover from something like that.
Firstly when you can’t pay back any payments either in business or personal is speak to the lender. Go to the lender and be transparent tell them the situation. Let them be aware that you cannot pay them so they can see if there’s anything that they can do to support you.
If you just disappear and hide, that’s not a good thing to do.
The two different types of businesses that have bounce back loans are self-employed and limited companies.
If you took out a bounce back loan and you’re self-employed, then you are personally liable for the loan. As the lender to spread the payment terms over a longer period of time. Maybe freeze the interest, maybe there’s a smaller payment amount for some time.
Whatever you do, if you get into difficulties call the lender and negotiate a lower payment. They would rather receive a smaller payment than nothing at all.
Heres what happens if you cannot pay back your bounce back loan.
If you’re a limited company but if for some reason the business didn’t work out, then you can just shut your limited company down and you won’t be personally liable for that loan.
The goal of the loan was to keep your business trading through the pandemic, however if for some reason it doesn’t work out, you have to wave a white flag and say this just didn’t work out.
The Bank are not going to chase you for years and years because you are protected by this scheme. In that case you need to let the lender know you have stopped trading and they will claim the loan payments directly from the Government.
I’m not saying that you should do this, I’m just saying this is what you could do.
So just to be clear on that right?
You could shut your company down, you wouldn’t need to pay it back a limited company is not personally liable for this loan.
For that reason the risk is very low to the business owner, I truly believe every business owner should be applying for a loan to secure their business future.
I hope that helps you better understand what happens if you cannot pay back a bounce back loan.