BBL anxiety - Should you be worried about Bounce Back Loan consequences?Posted: May 10, 2022

You have probably seen various stories in the press about Directors of businesses being caught out because they were less than honest with their BBL applications. In some cases, this was true, and the loans were illegally obtained. That said, at the time they were released, the information surrounding the Bounce Back Loan applications was somewhat limited and even a little hazy. As a result, horror stories of mistakes being made, rushed and inaccurate applications being processed and consequences for those who abused the process abound. So, should directors be worried about their BBL if insolvency is looming?

Should you be worried your BBL will be considered fraudulent if you are insolvent?

For thousands of Directors, the answer to this is probably no, it is very unlikely. It was never a condition of the BBLS that there was any requirement for personal guarantees. Most of the usual restrictions and conditions for obtaining credit did not apply. The most important consideration here is that you should not let any concerns about a BBL stop you from taking advice if you are struggling financially.

As always, we cannot go into the minutiae of things in an article but in general terms, you will be OK if:

• You were a trading UK limited company on 1st March 2020
• You would not have been classed as ‘a business in difficulty’ on 31st December 2019 (basically this means you were in business and trading)
• You were not in the process of bankruptcy, liquidation, or debt restructuring

You also must have: 

• Requested no more than 25% of your turnover
• Not applied for multiple BBLs for the same business or subsidiaries of the business
• Used the loan to support the business in general and not you personally
• Not used the loan to repay personally guaranteed debts in preference to others, including your director's loan account

Basically, if you took the right amount based on your turnover and spent it on things that were financially beneficial to the company or reasonable expenses, then you should be fine. The common-sense general answer is, were you sensible with the money from your Bounce Back Loan? if you were then you are unlikely to become personally liable in because of insolvency.

When should you be worried?

First of all, let’s restate what we said in the last paragraph. Under no circumstances should you let fear of repercussion from a BBL stop you acting if you are heading for insolvency. If you do, it will only make things worse.

The BBLs were rushed through, and they were unique in the history of lending. That means mistakes were bound to be made somewhere along the way. In many cases therefore a potential problem with a BBL could simply be down to misunderstanding what was required or how the loans could be used. Ask yourself: 

• Did you do something clearly inappropriate like taking BBLs for a dormant or non-trading business?
• Did you ask for more that 25% of your turnover?
• Did you use the money for the financial betterment of an individual rather than for the company?
• Did you pay off personally liabilities such as loans with personal guarantees in preference to other debts?
• Did you apply for multiple BBLs for use in the same business? 

If you did, then it would be hard to say you were acting in anything other than a fraudulent manner because frankly, these (and a few other conditions) were the only thing that was totally clear at the time.

So again, common sense will give you the answer here. If you went out and used your BBL to buy a boat or pay off your mortgage, then you have a problem. If you specifically broke the rules to obtain money for a business that you then purposely arranged to close, you have an issue, and so on.

What should you do if you are facing financial difficulties and have a BBL?

Whatever happens, your financial problems are not going to go away and your BBL is one factor in those problems.

Here is what we suggest you do next:

• Take stock of your financial situation by reading through our advice <click here>.
• Get your books and other finances up to date and as complete as possible
• Make sure you fully understand your position, who your creditors are, and what is owed, including any personal guarantees
• Call us or book an appointment online and let’s have a free chat to see where you stand.

The bottom line is that if you are in a position where your business is insolvent, then nothing will change unless you act. Concerns over BBLs are simply part of the mix and we need to see the whole picture to help you.

We can only do that if you talk to us.