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What Happens When You Can’t Pay a Bounce Back Loan?

Written by, Marija Petkova

Updated November, 1, 2023

If you’ve taken out a bounce-back loan to help your business through the coronavirus pandemic, you may be wondering what will happen if you can’t pay the bounce back loan, what are your options, and how to avoid bounce back loan repayment troubles.

Let’s dive in.

What is a Bounce Back Loan Scheme?

The Bounce Back Loan Scheme (BBLS) is a government program in the UK that was introduced in 2020 to help businesses stay afloat during the coronavirus pandemic

The program was designed to provide financial support for businesses that were struggling to maintain their cash flow and were losing revenue as a result of the pandemic-related measures. Note that there are 5.94 million small businesses in the UK and at least 250,000 might close up due to COVID.

The maximum loan amount was £50,000 and businesses could take a six-year term loan for a minimum of  £2,000  and up to 25% of their turnover. What’s more, the loan came interest-free for around a year and was government-backed, which means the lender could approve as long as you meet the minimal requirements, regardless of your credit score, and without having to provide personal guarantee.

What Happens When You Can’t Repay a Bounce Back Loan?

Regardless of the state of your business, the borrower isn’t personally liable for the loan unless they used it to cover personal expenses. Nevertheless, bank lenders will try to recover the loan following standard procedures regarding unsecured loans. In fact, over 6 million Brits had taken out an unsecured loan. This could involve turning to debt collection agencies and court action.

What Are the Options When You Can’t Pay a Bounce Back Loan?

Pay As You Grow

The Pay As You Grow options give businesses more flexibility when it comes to the paying back bounce back loan. 

Under the new “Pay As You Grow” initiative, they can extend the loan for up to 10 years at a 2.5% interest rate, switch to a 6-month interest-only payment deal to reduce monthly payments, or ask for a 6-month full repayment holiday, including capital and interest. 

Borrowers are allowed to combine Pay As You Grow options too.

Company voluntary agreement

A company voluntary agreement or CVA is another solid solution for borrowers unable to pay back a bounce back loan.

A CVA is a legally binding arrangement between a corporation and its lenders in which the creditors get paid a portion or all of their debt over a certain period of time while the company continues to trade. The CVA is overseen by an insolvency practitioner, who ensures that the company adheres to the agreement’s provisions and that the agreed-upon payments are paid to the creditors. 

This means you may pay off the Bounce Back Loan and any other obligations in manageable instalments over a defined period of time.

Administration order

The administration gives businesses the ability to continue operating when they are unable or unwilling to pay their debts

The company will have an insolvency practitioner who manages all of its affairs, usually in the best interests of creditors, which may grant them enough time to figure out their finances without having to face any significant consequences, like selling their assets.


Liquidating a company is a last-resort tactic. 

It involves selling off all assets, paying creditors what they are owed from those sales, or whatever remains after that payment has been made. Any debt that remains is often written off, including bounce back loans, unless it was secured with a personal guarantee.

Can I Dissolve My Business With an Outstanding Bounce Back Loan?

If you are unable to repay your Bounce Back Loan and are nearing insolvency, you should consider legal bounce back loan liquidation. Business owners can close their company with an outstanding bounce back loan and are likely to pay off what they owe after selling their assets.

Defaults on bounce back loans, as well as other corporate obligations, are currently on the rise. If dealing with your bank, HMRC, and other lenders is becoming increasingly challenging, it’s best to seek help from a professional insolvency practitioner to figure out the best approach.

Is It Possible for Bounce Back Loans to be Written Off?

Under the Bounce Back Loan Scheme, all loans are liable for recovery. 

However, you can write off a part of your loan if you enter the liquidation process and close your business. You are required to use the money from selling your assets to pay back what you owe, but, in cases where the company doesn’t get enough, the remaining debt is usually written off.

There have been talks about how to handle defaults on bounce back loans and how to help businesses repay them as it has been projected that up to 40% of businesses will be unable to repay their loans. However, they haven’t introduced any policies that say debt will be written off.

Bottom Line 

Many businesses that are still struggling from the change in place due to the coronavirus pandemic can’t pay the bounce back loan. Luckily, there are a few options that they can opt for in case they’re on a tight budget, including extending the loan or paying for both capital and interest in a shorter period.

My name is Marija, and I'm a financial writer at DontDisappointMe. Although finance might not be everyone's cup of tea, my 10+ years of working in one of the biggest banks in my country, and my interest in extensive research on everything finance/investment-related, have made me somewhat of an expert in the field (if I do say so myself). No longer having the passion to work in a corporate setting, I decided that I couldn't let all of this knowledge go to waste so I started writing. And, here I am! Today I try to share my knowledge with my audience in the hopes of making this topic as simple and interesting as possible. In my leisure time, I like spending time with my family and travelling to new locations.