The Bounce Back Loan payment extension for directors

Directors of companies that have received Bounce Back Loans but have yet to repay them will be pleased by a recent HM Treasury announcement which confirmed a voluntary scheme whereby directors can pay back the Bounce Back Loans without penalty, if they do so before 25 December 2025.

What are Bounce Back Loans?

Bounce Back Loans were launched in May 2020 as a Government initiative to keep small and medium-sized businesses afloat that were reeling under the COVID restrictions. They offered sums between £2,000 and £50,000 to eligible companies, repayable over a six-year period. The loan was limited to 25% of the annual turnover of the applying company.

The Bounce Back Loans were the responsibility of the company to repay at an annual interest rate of 2.5%. The application form for the loans was not particularly demanding. The state gave the banks and financial institutions who lent the Bounce Back Loan a 100% guarantee without the necessity of personal guarantees from the company’s directors.

Consequences for breaching the loan conditions

Directors who have breached the Bounce Back Loans regulations have faced consequences. Breaches include claiming in excess of the company’s 25% turnover, obtaining a number of loans for one company, or using the loans for non-business reasons, including the purchase of expensive cars for one’s own use. Those directors who have dissolved other companies and haven’t repaid their Bounce Back Loans, have faced severe penalties such as compensation and or disqualification orders.

The Insolvency Service has been pursuing an increasingly large number of these directors in an uncertain economic environment, as the state decides how to recover the billions worth of unpaid Bounce Back Loans.

Post-25 December 2025, tough sanctions will undoubtedly be directed against directors who have breached the Bounce Back Loan regulations, which will include companies being wound up and their financial history closely examined by the Insolvency Service, and directors being disqualified or a compensation order being made against them.

Therefore, the Insolvency Service’s focus is on any director who has supplied false/misleading information to obtain Bounce Back Loans which remain unpaid – irrespective of whether the company is in or out of liquidation/administration. Insolvency Practitioners who have been appointed as, for example liquidators or administrators, are already aware of their duties to identify any unpaid Bounce Back Loans and are heavily criticised if they do not identify these. Indeed, the Insolvency Practitioners’ regulatory bodies responded to the amnesty announcement by stating that if a company is in an insolvency procedure, it should pay the Bounce Back Loan to the Insolvency Practitioner and not the lender.

Perhaps the most telling indication of the Government’s focus on bringing recalcitrant directors to account, is that the Covid Counter-Fraud Commission has introduced a fraud helpline to whistleblow on Bounce Back Loan frauds. Obviously, out-and-out frauds committed by directors will not enjoy the benefit of the amnesty.

If you have any concerns about non-payment of Bounce Back Loans, please contact Tony Sampson.