The government’s coronavirus business loan schemes have offered invaluable financial support to businesses during Covid-19, providing emergency finance in unprecedented circumstances.
As the economy starts to open up again, however, many businesses are still experiencing financial distress and finding it difficult to meet their ongoing liabilities. So if your business has missed a Bounce Back Loan or CBILS payment, or is about to do so, what are the implications for yourself and your business?
Because Bounce Back Loans and CBILS lending under £250,000 don’t require personal guarantees, you aren’t at personal risk if your business misses a repayment or defaults on the loan. There are potential longer-term implications, however, if your business debts become unmanageable as a whole and you need to enter liquidation.
The CBILS and BBLS programmes are guaranteed by the government by 100% and 80% respectively, but this doesn’t mean that your business isn’t liable if you can’t pay. Liability remains with the borrowing businesses throughout unless the company enters liquidation.
This means that if you miss a Bounce Back Loan or CBILS payment you may just need to repay it as soon as possible. If the missed payment is indicative of deeper financial troubles, however, you should take action to address the situation before it gets out of control.
So what can you do to pre-empt more serious financial problems, make sure you can catch up with the missed payment(s), and prevent any more serious defaults?
UK Liquidators can provide valuable insight and solutions to any financial problems your business is experiencing, presenting options tailored to your situation. This may simply involve a cost-cutting exercise to streamline outgoings, for instance, or more formal measures to protect your business from creditor legal action.
When you miss a Bounce Back Loan or CBILS payment it could be a sign of more serious underlying problems, which is why the first step should always be to seek a professional assessment of your business’ health and overall stability.
Additional finance can provide the cash flow support you need. If your sales ledger is generally healthy, for example, invoice finance can help the business get back on track with your coronavirus loan, as well as meeting other financial commitments.
HMRC also run a Time to Pay scheme for eligible businesses that have fallen into tax arrears. This would allow you to repay any tax arrears within a new instalment plan that typically lasts 3-6 months.
Formal insolvency solutions, such as a Company Voluntary Arrangement (CVA) or company administration, can also rescue or protect your business until cash flow improves.
Sometimes when a company misses a loan repayment it’s a sign of deeper problems, and it ultimately has to be liquidated. If you’ve only missed one or two payments and are able to pay your other bills as they fall due, you may not be insolvent but it’s important to monitor business performance very carefully.
In fact, it’s a legal duty to be aware of your company’s financial position at all times as a director. Doing so safeguards creditors from financial loss, whilst also protecting you from unwittingly trading whilst insolvent.
Should the business experience further decline, company liquidation may be the only way out, but we can support you through the process from start to finish, and ensure you meet your obligations as a director.
It’s worth noting that if your company does need to be liquidated in the future, you may be able to claim redundancy pay if you’ve worked for the business as an employee. For more information on director redundancy, and for tailored advice on what happens if you miss a Bounce Back Loan or CBILS payment, please get in touch with our expert team. UK Liquidators runs a network of offices throughout the UK, and can offer you a free, same-day consultation.
If you are considering liquidation for your limited company, taking advice from a licensed insolvency practitioner can help you understand your options.
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If you are considering liquidation for your company, taking expert advice at an early stage is crucial. At UK Liquidators, our team of licensed insolvency practitioners are committed to providing limited company directors with the help and advice they need to make an informed decision.
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