If your company cannot repay its Bounce Back Loan, then it is in effect, insolvent. If this is the case, you may be issued a winding-up petition from your lender.
Will banks write off bounce back loans?
Your Bounce Back Loan (BBL) will only ever be written off if repayment by your business is impossible.
If you can’t repay the loan, which is likely due to cashflow issues, the bank will turn to the government to get the loan back. However, the bank can only do so if the company enters a formal insolvency proceeding, such as liquidation.
Will the bank serve a winding up petition for a Bounce Back Loan?
Since the banks are a primary lender for Bounce Back Loans, they provide many loans for prospective borrowers who declare optimistic turnovers.
However, if you have a BBL and cannot repay it, the banks can serve winding up petitions. This constitutes as a reasonable action to recover the loan and prevents business owners from trying to write off the loan.
Trying to dissolve your business without paying back the BBL will most likely result in failure, since the banks will contest dissolution, forcing the companies to stay open. The winding-up petitions are then subsequently served, resulting in the liquidation of the business and the debt being repaid.
Who can serve a winding-up petition for a Bounce Back Loan?
Your lender, which will most likely be a bank, are the only ones who can serve a winding up petition for a Bounce Back Loan, since they are the ones who you borrowed the money from.
Usually, any creditor owed more than £750 can start a winding-up petition, but in this case, it is only the banks who are owed the money for the BBL repayments.
Why do banks issue winding up petitions?
Banks will issue a winding-up petition if they have exhausted all other methods of retrieving the money owed to them.
This is the most serious action that can be taken against your company and it is often preceded by a statutory demand.
What should directors do if a bank issues a winding up petition?
If you agree that the debt is due, then we strongly suggest you pay it off or reach some sort of settlement as soon as possible. In the case of Bounce Back Loans, you will most likely have to reach some sort of repayment settlement with your bank if you believe you can pay it back.
It is imperative that you act quickly within the first seven days, otherwise your company’s financial situation will become public knowledge.
Seeking advice and guidance from licensed insolvency practitioners, such as ourselves at The Insolvency Experts, will ensure you understand all your options.
What should you do if you can’t repay your Bounce Back Loan?
If you can’t repay your BBL, it is imperative you seek expert guidance as soon as possible.