What if a limited company doesn't survive pandemic even with BBL

[Deleted User]

Was the business in financial difficulty before Covid? Is the business likely to recover? Are you using the money to bridge a temporary lull in business, or do you just see it as a way to pay yourself as the director for the next few months?
If you are using it to pay yourself as a director and in doing so make the company insolvent then that would be wrongful trading, which makes the directors personally liable for the debts of the company. It is highly likely that if you have issued any dividend since Covid began and any funds paid to the directors paid to the directors would be seen as wrongfully distributed if a BBL or CBIL was unpaid when a company liquidated and the liquidators would seek to recover them. 

The simple fact of it is that if the company will not survive and recover, do not take out the loan.

Grumpy_chap

We have yet to see how, but it is absolutely certain that the Government will have some mechanism to pursue BBLS advances that are not properly repaid.  It seems that in the first instance, the banks are required to pursue their normal debt recovery processes (but unable to take personal main residence).  

• Failure to repay will certainly impact credit ratings of individuals / companies. 
• Directors may be barred from holding office.
• Possible fraud cases if people take the loan, pay themselves dividend, then dissolve the company thinking they have run away from it.

Obviously, the details will vary between sole-trader and Ltd Co.

davetheraver

I think Grumpy Chap and the other responses have made it pretty clear,

I read on Twitter about a group on Facebook who are discussing methods of getting accepted for the BBL, when they are not even in business or entitled to it. I knew from the start this would trigger a lot of people into thinking its an easy cash gift as its Covid, but as others have mentioned, they will be pretty ruthless and aggressive in recovering unpaid debts. I would rather owe the bank the money the the Government or Tax office.

I just think its wrong people have this mind set, sure I thought the possibility of it, but was thinking other people would be doing it as opposed to myself. All these false or unnecessary applications have not only caused a blockage with genuine applicants being paid, like myself, but also the banks are clearly seeing these fraudulent or false applications, and probably going through even the genuine ones with a fine tooth comb.

It will be interesting to see in 13 months time when repayment begins, and people are paying due to be paying out £200-£1000 every month and they never even had a real business anyway, or they did and just used the money irresponsibly.

I'll begin paying mine back immediately to maximize that year of free interest, I dont think taking the year payment holiday is such a good thing.

khanji17

davetheraver said:

I think Grumpy Chap and the other responses have made it pretty clear,

I read on Twitter about a group on Facebook who are discussing methods of getting accepted for the BBL, when they are not even in business or entitled to it. I knew from the start this would trigger a lot of people into thinking its an easy cash gift as its Covid, but as others have mentioned, they will be pretty ruthless and aggressive in recovering unpaid debts. I would rather owe the bank the money the the Government or Tax office.

I just think its wrong people have this mind set, sure I thought the possibility of it, but was thinking other people would be doing it as opposed to myself. All these false or unnecessary applications have not only caused a blockage with genuine applicants being paid, like myself, but also the banks are clearly seeing these fraudulent or false applications, and probably going through even the genuine ones with a fine tooth comb.

It will be interesting to see in 13 months time when repayment begins, and people are paying due to be paying out £200-£1000 every month and they never even had a real business anyway, or they did and just used the money irresponsibly.

I'll begin paying mine back immediately to maximize that year of free interest, I dont think taking the year payment holiday is such a good thing.

I am thinking of paying back by the end of the tax free period, and not spend all of it, try to use as less as possible, just to give a safety net. Whatever is left in the bank once the year is over, pay it back in bulk  to reduce the payments. 
I hope the people who are in genuine need get the most out of it and there isn't an easy way out for the people who are trying to take advantage of the situation.

Jeremy535897

My reading of it is that you don't need to repay any capital at all until the end of year six.

Sibbers123

Jeremy535897 said:

My reading of it is that you don't need to repay any capital at all until the end of year six.

That's incorrect. The maximum repayment terms are 6 years (i.e. it all has to be repaid within 6 years)

Sibbers123

If the terms of the loan are broken, then I would expect an aggressive approach to recover the capital. If fraud has occurred, then the borrowers main residence will not be safe from repossession.

I would encourage reading the FAQs here before jumping in the deep end: https://www.british-business-bank.co.uk/ourpartners/coronavirus-business-interruption-loan-schemes/bounce-back-loans/faqs-for-small-businesses/#f8

Jeremy535897

There doesn't seem to be anything obvious in the FAQs, but I think the standard terms must be like a repayment mortgage over the five years then?

Thrugelmir

The failure rate amongst small businesses is extremely high. Even in better times. At some point we'll get to hear the Government's thinking. One can only assume it's to provide the entrepreneurial individuals with funding in order to continue to do something in the future. Even if it's not the same line of business. While it's a nice lump sum. Doesn't equate to a decent ongoing living for years to come. 

PamOlo

What would happen if a Ltd company did fail even after getting the loan, would it be possible for the director to continue to pay the loan out of personal funds?