What can I do if my company cannot repay its Bounce Back Loan?

What did my company actually sign up to?

Some loans were taken out quickly, when the priority was keeping the doors open. It helps to go back to them now, because the original terms explain most of what is possible today.

GOV.UK's archived guidance on how to apply for a coronavirus Bounce Back Loan says the scheme helped businesses borrow between £2,000 and up to 25% of their turnover, with a maximum loan of £50,000. It says the government guarantees 100% of the loan, that there were no fees or interest for the first 12 months, and that after 12 months the interest rate will be 2.5% a year. The same page says the length of the loan is 6 years, and that you can repay early without paying a fee.

Two details from that page are worth holding on to. First, the guarantee is to the lender, not to you: the page says the business is responsible for repaying 100% of the amount borrowed. Second, the scheme closed to new applications and top ups on 31 March 2021, so the loan you have now is the only one available under it.

The Insolvency Service's fact sheet on Bounce Back loans puts the starting point plainly. It says the money lent to your company must be paid back, over 6 or 10 years, with payments starting 12 months after your company receives the loan.

What repayment options are lenders expected to offer?

The flexibility built into the scheme is known as Pay as You Grow. HM Treasury's announcement of the Pay as You Grow options set out three of them: extend the length of the loan from six years to ten, make interest only payments for six months with the option to use this up to three times, and pause repayments entirely for up to six months.

The same announcement says the government made clear that lenders are expected to offer these options to all borrowers under the scheme. It also notes that the Financial Conduct Authority's conduct rules require lenders to show due consideration and appropriate forbearance to borrowers in difficulty.

Option	What it changes	Limit on use
Longer term	Spreads what is left over a longer period, from six years to ten	Ten years in total at most
Interest only	You pay interest but no capital for six months	Up to three times during the loan
Payment pause	No repayments at all for up to six months	Up to six months

Each option eases cash flow in a different way, and each may change what you repay in total. Ask your lender to show you the figures for each choice before you commit. Ask your lender how often a pause can be used.

What does GOV.UK say about struggling to repay now?

The government's more recent guide to the Voluntary Repayment Scheme has a section for borrowers in genuine difficulty. It says that if you are repaying in accordance with your repayment schedule and facing genuine financial difficulty in doing so, you may be eligible for the Pay as You Grow scheme, and that you may also be entitled to other support as determined by your lender. It tells you to contact your lender to discuss these options.

For loans that have already fallen behind, the same guide says that if you have defaulted on your repayments and your lender has issued a formal demand, you should contact your lender to discuss your options, and that you may be able to enter into a repayment plan.

The Voluntary Repayment Scheme itself was a separate route for loans that should not have been taken out, were not needed, or were in default. The guide says it was open until 31 December 2025 and that arrangements set up before then will continue as agreed. It also says you can contact your lender directly at any time to make repayments on outstanding loans. For most directors who simply cannot afford the repayments, the lender conversation is still the route that matters.

Why do directors put off the conversation?

One reason is hope. Trading picks up a little, the next quarter looks better, and the letter from the bank stays in the drawer.

A second reason is rumour. Some directors have heard that Bounce Back Loans were never really expected to be repaid, or that closing the company makes the debt disappear. GOV.UK says otherwise on both counts. The fact sheet says that if the money your company borrowed is not repaid, your company may be investigated by the Insolvency Service, even if it has been dissolved. It also lists dissolving your company to avoid repaying the loan as one of the types of misconduct it looks for. If you are thinking about closing the company, our post on whether striking off is the right way to close it sets out why that route needs care.

A third is treating the loan as separate from everything else. It is one creditor among several. If the company is also behind with HMRC, suppliers or rent, the honest question is not only how to repay the loan but whether the company can meet its debts as a whole.

Why do records of how the loan was used matter?

The fact sheet says Bounce Back loans were made on the condition that they were not to be used for personal purposes, but could be used, for example, to purchase a company asset such as a vehicle, if it would provide an economic benefit to the business.

That makes good records important. If you can show where the money went, in bank statements, invoices and the company's accounts, you are in a far better position for any conversation with a lender, an accountant or an insolvency practitioner. If the records are patchy, it is worth putting them in order now. We cannot comment on whether any particular use of a loan was proper. That is a question for a solicitor if it ever arises.

What should I gather before I speak to my lender?

You do not need a polished plan. You need a clear, honest picture.

Start with the loan itself: the balance outstanding, the monthly payment, the current interest rate and whether any payments have been missed. Add a simple cash flow forecast for the coming months showing what the business can realistically afford. List the company's other debts alongside it, so the lender can see the whole position rather than one line of it. Then decide which option you are asking about, and ask the lender to put the effect on total cost in writing.

Keep a note of every call and copies of every letter. If the conversation moves on to a formal demand, that record will matter.

When is this not the answer?

This post explains how the scheme's repayment options work in general. It cannot tell you what your lender will agree, and it cannot assess your own position as a director.

If insolvency is a possible outcome, for example because the company's liabilities are more than the value of its assets, the Insolvency Service's company health check guidance says your responsibilities as a director change and you must put the interests of the company's creditors first. At that point get advice from an authorised insolvency practitioner, solicitor or accountant. If you have received a formal demand or a letter about how the loan was used, speak to a solicitor. For free, impartial help with business debts, the Voluntary Repayment Scheme guide points to Business Debtline, a charity providing free, impartial debt advice and support to small business owners and self employed people.

If repayments are affordable and you simply want to understand your options, a straightforward call to your lender may be all you need.

Where can I talk this through in confidence?

A Bounce Back Loan that has become hard to repay can be a sign of something wider: margins that never recovered, or cash flow that has stayed tight ever since. Looking at the whole picture calmly tends to make the next step clearer.

If that would help, you can book a confidential consultation. We can help you organise the figures, prepare for the conversation with your lender, and work out when you need a regulated adviser. You can read more about our business recovery work.