Are you worried or struggling to repay a Bounce back or CBILS loan?
It seems a fair while ago since lockdown and the immediate consequences of those times. The effects though are still prevalent in the business world, with many businesses now facing difficulties in making repayments on Government support loans taken out in the early days of the pandemic.
If you are a director of a limited company currently experiencing concerns over repayments of either a Bounce back loan (BBL) or a CBILS loan, then here at CFS, we are able to provide you with the help you need. As licensed insolvency practitioners with decades of experience across almost every sector of industry, we have extensively qualified partners and staff ready to assist.
What is the difference between Bounce Back and CBILS loans?
Bounce Back Loans
Bounce Back loans were capped at a maximum of £50,000 and were provided to a company by a bank or other lending institution on a completely unsecured basis – i.e. the lender could not ask the directors for personal guarantees in support of the BBL. All BBL lending by the financial institutions was guaranteed by the Government.
A CBILS loan had a maximum ceiling of £5.0 million. As with BBLs, the Government guaranteed the amounts lent by the financial institutions, up to 80% of the loan.
CBILS loans under £250,000 were provided without any personal guarantees from directors. In respect of CBILS loans over £250,000, then the financial institution providing that loan, had the option of seeking personal guarantees from the directors. Our research has identified that the vast majority of CBILS loans over £250,000 have been personally guaranteed by directors. Those guarantees though are capped at 20% of the outstanding balance on the CBILS loan after applying the proceeds of sale of any business assets against the loan. If you are in any doubt about the potential liability you think you may have under this scheme, then please just call or email us and we will be more than happy to chat through with you and issue you may have. Call on 0115 838 7330 or email us at firstname.lastname@example.org.
Loan Term extensions – Pay as you grow- PAYG
As the business world gradually opened up after the pandemic, the Government recognised that the initial repayment terms of both BBL and CBILS loans could present financial difficulties to a significant number of companies. As such, they introduced the Pay As You Grow scheme, which effectively allowed companies to extend the repayment term from a maximum of 6 years to 10 years. Again, our research has shown that this has eased the burden on a number of companies from a cash flow perspective, but the overall liabilities still remain outstanding.
What will happen if my company cannot repay the Bounce back or CBILS loan?
As highlighted above, there is a slight difference between a BBL and a CBILS loan in terms of the guarantees provided by the Government, but the principal of recovery is the same. The lending institutions can only call upon the Government guarantee where a company is formally declared insolvent – i.e. the company goes into either insolvent liquidation or administration. In those circumstances the lending institution can look to recover 100% of the outstanding balance on a BBL, and 80% of the balance in respect of CBILS loans. In such circumstances, the directors of a company proceeding into insolvency would have no personal liability in relation to any BBL outstanding, although could face a personal liability of up to 20% of the outstanding balance in relation to any CBILS facility.
HOWEVER, there has been significant coverage in the media relating to both BBL and CBILS loans, in particular the amounts estimated to have been either fraudulently applied for or fraudulently misused. This has clearly been picked up by the Government who through the Department for Business, Energy and Industrial Strategy (DBEIS) have now amended the information that insolvency practitioners are required to submit to them when submitting a report on the conduct of directors of insolvent companies.
A liquidator or administrator of a company is required to submit a report on the directors’ conduct to DBEIS within 6 months of the appointment. This report must now include reporting on BBL and CBILS loans in particular highlighting any concerns over the actual application and the use of those funds.
Should your company be struggling to make repayments of your loans, even after utilising the PAYG scheme, then there are a number of other options available to you, depending on the depth of the problems.
In the event that your company has HMRC arrears in relation to PAYE/NI and or VAT, then you may be eligible to apply to HMRC for a Time To Pay (TTP) arrangement. There are a number of criteria that apply, but on the assumption that you can prove your case, HMRC may give you an additional 12 months in which to clear your outstanding liabilities. The company itself can present its case directly to HMRC, or alternatively, we would be more than happy in doing so on your behalf – we have dealt with innumerable such cases in the past.
Even though you may have a BBL and a CBILS loan, there may be the option of trying to refinance your current lending package. We have excellent contacts with a number of financial institutions that could possibly provide you with an alternative financing packing aimed at improving your cash flow.
If you wanted to discuss this option further, please contact any one of our partners on 0115 838 7330.
There are also a number of insolvency options available, should you believe that it would not be feasible to either trade out of the current position with the existing liabilities or secure additional/alternative funding. These include:
- Implementing a Company Voluntary Arrangement
- Company Administration
- Creditors’ Voluntary Liquidation
You can access further details on these processes by clicking on the links above.