What Happens If You Close A Company When You Have a BB loan?

Thousands and thousands of companies across the UK have benefited from the bounce back loan scheme. With the BB loan helping them bounce back as the country slowly starts to edge back towards a level of normality following the COVID-19 pandemic and the subsequent lockdowns.

However, if you’re a business owner, the question might have entered into your mind what would happen if you close a company down when you had taken out a BB loan. And to help answer that question we are going to look into that today.

More companies are going into liquidation than they have in a long time. Even with the help of the bounce back loan scheme pre-pandemic trade and revenue hasn’t returned and subsequently, business owners have been forced to liquidate their company.

Traditionally, if you were to put your company into liquidation, banks are usually the chosen creditors, and any debts that you owe to them are secured from your company’s assets. This would then mean that primarily they would be paid first with any funds generated from the sales of your business’s assets. However, the bounce back loan would be an exception to this rule.

If you do put your business into liquidation as part of closing the company down, the bounce back loan then becomes an unsecured debt. This is primarily because the loan itself when it was given to you by the Government wasn’t secured against any asset in your company. And as a general rule of thumb, any unsecured debts are rarely paid in full at the liquidation stage of company closure.

This means that because the BB loan was secured by the government, it will be down for the lenders who have monies owed to them to chase the government for the repayment of the loan. And so on that front, there is no personal liability. However, there are a couple of situations that can arise whereby you can be personally liable for the loan. These are if you use the funds for purposes that are not for the benefit of the company, or when you pay certain creditors ahead of others. And so you must be really careful.

If you want to know more about the restrictions and regulations surrounding bounce back loans and the liquidation process, get in touch with a member of our team here at D&K Accounting, your team of Profit First professionals.

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