I cannot afford to repay my Bounce Back Loan

We must admit that reading agreements can take forever, and we’ve all been guilty of just pressing "accept" after barely skimming over some of them. However, even if you didn’t read the entirety of your BBL agreement, there is one condition in your agreement that was very important for you not to miss. Bounce Back Loans must not be used for personal purposes. This might seem obvious, but we have found that many people didn’t fully understand this condition and, you guessed it, used it for personal purposes.

Let’s come back to this later...

As mentioned before, if you cannot pay back the BBL, the government will swoop in like a knight in shining armour to save you. Not exactly like that, but they will take over the debt and pay it on your behalf as the Guarantor.

Many people don’t realise that the lender must try every method possible to recover the debt from the business. Only once they have exhausted every method will the lender turn to the government to settle the debt.

Sounds pretty straightforward, right? It can be, but there are a few things you need to know.

Before the Government agrees to take over the debt, your business must have ceased trading or become insolvent. So, the likely course of action by the lender would be to petition for your company to be wound up. This means your business will stop, well… “businessing” (that’s not an actual word). This means that your company will stop doing business, and any assets the company has will be sold and used to repay debts.

The lender's goal is for the court to agree with the application and grant a winding-up order. Once granted, the lender can approach the government to settle the remaining debt after recovering any money from liquidated assets.

If you’ve mistakenly used the loan for personal purposes, don’t panic. You must pay attention to this section.

The government will only guarantee the loan if there is no misconduct relating to the loan.

Misconduct can include any of the following:

• Dissolving your company to avoid paying the loan back.
• As we’ve mentioned already - using the loan for personal purposes.
• Providing false or misleading information on the Bounce Back Loan application.

An example of this last point would be declaring a higher turnover figure than your company has, e.g., declaring £250,000 as the company turnover when it’s £50,000.

If the company is in liquidation, the liquidators will look for areas of misconduct as part of their review of the company’s financial situation. Should the liquidators discover any misconduct, they will include it in their report and pass the findings on to the lender.

As we said earlier, don’t panic; keep reading...

The most important things for you to know are these two points:

1. The bank wants the money, and that is its primary focus.
2. The government will not take responsibility for any debts they don’t legally need to.

It's important to remember that financial missteps are common in life. You aren’t the first, and you certainly won’t be the last. In this case, you will be expected to correct the mistake. How? You might ask.

You will be expected to repay the loan, so if you can do this, other than a possible director ban for a period, you should face no further serious consequences.

If you can’t repay the loan, keep reading; we will cover this a little later.

There’s good and bad news. The good news is that, if you can, you may wish to consider clearing the debt yourself. Remember those two important points:

1. The bank wants the money, and that is its primary focus.
2. The government will not take responsibility for any debts they don’t legally need to.

Clearing the debt ticks both boxes, meaning that you will unlikely face any severe repercussions.

The bad news is that if you cannot clear the debt, the bank may take you down the liquidation route, as covered earlier.

We’re not just going to leave you like that, no way!

Even bad news has a bit of good news with The Real Debt Guy. The bank must look at all available options for you to clear the debt before applying for a winding-up order. This can include increasing the amount of time you have to clear it, which may result in your monthly payments being reduced.

Unfortunately, the bank will pursue you personally for the debt and, most likely, to court.

If you own a property, the bank will likely apply for a “Charging Order.” Don’t worry—we have an article that explains what this means and how to handle it.

If you do not own a property, the lender will explore other enforcement methods, which may include instructing bailiffs. Again, we have you covered on this, too. Read our article “Bailiffs—know your rights.”

We got you!

The Real Debt Guy is a qualified financial adviser and a UK debt expert. The information in this article is considered to be true and correct at the date of publication.