The Bounce Back Loan Scheme (BBLS) was a lifeline for thousands of small businesses during the pandemic. It provided fast and accessible support when cash flow was under intense pressure. But while it helped many companies survive the storm, it wasn’t a silver bullet. Fast-forward a few years, and many directors still deal with the aftermath.
If your company took out a Bounce Back Loan and is no longer trading or able to repay it, you’re not alone, and there’s a lot of confusion about what happens next. Banks may be contacting you directly, you may be struggling to dissolve the company, and you may be unsure of your legal responsibilities.
In this post, we’ll explain how Bounce Back Loans worked, what happens if your company defaults, and what banks can (and can’t) do in response. We’ll also examine your options if your business is no longer trading and you’re left in a state of limbo.
What Was the Bounce Back Loan Scheme?
The BBLS was introduced in 2020 as part of the UK Government’s emergency COVID support for small businesses. Unlike other loan schemes at the time, it was deliberately quick and straightforward to access. This meant:
Businesses could borrow between £2,000 and £50,000, up to a cap of 25% of turnover.
The government guaranteed 100% of the loan to the lender.
Banks offered the loans on unsecured terms – no personal guarantees or assets required.
The interest rate was fixed at 2.5%, with the first 12 months interest and repayment-free.
Many companies received funds within days of submitting their applications.
Due to this streamlined approach, some loans were extended to companies already in financial difficulty, or to new companies with limited trading history. This has led to a high level of default in the years since, causing considerable stress for directors as they attempt to deal with the fallout.
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What Happens if the Company Can’t Repay the Loan?
If your business is no longer trading and has no funds to repay its Bounce Back Loan, the debt remains with the company, not with you personally (assuming it is a limited company).
The key things to understand are:
- The bank must first try to recover the debt from the company itself.
- If there are no assets or money left in the business, the bank can submit a claim under the government’s 100% guarantee.
- The bank cannot automatically pursue you personally, as no personal guarantee was provided when the loan was taken out.
Can the Bank Chase Me Personally?
We’re seeing a worrying trend where some banks are contacting directors directly after a loan default, implying that the director is somehow responsible for the default. This can include:
– Letters asking for full repayment.
– Suggestions that the bank will ‘offset’ the debt against personal accounts held with them.
– Repeated emails or phone calls addressed to the director rather than the company.
This is misleading.
Unless…
– You gave false information on the loan application.
– You used the loan funds for personal benefit.
– You traded recklessly while insolvent.
…then you are not personally liable for the loan.
No personal guarantees were required for BBLS loans. That means the bank can’t go after your personal finances or demand repayment from you as an individual unless they believe misconduct occurred and can prove it.
What About My Personal Account with the Same Bank?
If your business loan was with the same bank you use personally (e.g., Santander), they might suggest that they’ll take money from your personal account to offset the company’s debt.
They are not legally allowed to do this.
Company and personal finances must be treated separately. Even if the bank holds both accounts, they have no legal right to recover a company loan from your personal funds, unless you explicitly authorised a personal guarantee (which you didn’t under BBLS).
Why Has My Company's Strike-Off Been Blocked?
If your company has stopped trading, you may have tried to strike it off via Companies House. However, if you have a Bounce Back Loan outstanding, the bank will likely object to this.
This is because creditors are notified of the strike-off application and have the right to object to it. Most banks will automatically do this if there is an unpaid loan, especially if the government has not yet reimbursed them.
What does this mean for you?
– Your company will remain active on the Companies House register.
– You’ll still need to submit annual accounts and confirmation statements.
– You may receive letters warning you about non-compliance.
Companies can become stuck in this situation for a considerable amount of time.
What Are Your Options If You’re Stuck?
If your company has stopped trading but cannot be dissolved due to an unpaid Bounce Back Loan, it has become what is known as a ‘zombie company’.
Here’s what you can do:
1. Do Nothing – The company remains on the register, and you continue to be responsible for filings.
2. Appoint a Liquidator – Formal closure through a CVL (Creditors’ Voluntary Liquidation) provides a clean break.
3. Let the Bank Petition for Winding Up – this relinquishes control to the Bank and may be more stressful.
4. Speak to an Accountant or IP (insolvency practitioner) – they can explain your responsibilities and help you plan a way forward.
Practical Tips for Directors
– Respond to banks in writing as a company director, not as an individual.
– Keep your personal finances separate.
– Don’t ignore warning letters — but don’t be intimidated either.
– Keep a paper trail of all correspondence.
– Act before deadlines pass, particularly concerning filings and strike-off objections.
Frequently Asked Questions
No, unless you’ve done something unlawful or misused the funds.
Only if they believe there’s a case for fraud or misconduct.
Your company stays on the register, and you remain responsible for filings.
Yes, unless you’re disqualified due to misconduct.
Summary
What happens if my company defaults on a Bounce Back Loan? — The company owes the debt, not you personally.
Can the bank take money from my personal account? — No, not legally, even if it’s with the same bank.
Why has the bank blocked my strike-off? — They’re protecting their right to recover the loan or claim under the guarantee.
What should I do? — Speak to your accountant and consider a formal liquidation if needed.
Need Help Untangling It?
If you’re unsure where you stand or you’ve received worrying letters from the bank, book a free advice call with BBK Accounts. We can explain your options and, if needed, introduce you to our connected licensed insolvency practitioner to alleviate the pressure.
