The Bounce Back Loan Scheme was intended to help businesses who were struggling as a result of the Covid-19 pandemic. Originally set up in 2020 and with the last application date of 31st March 2021, the BBLS allowed smaller companies to access finance more quickly. However, following the first 12 months of no payments, businesses will now be starting to repay their loans over a period of 6 years.
Unfortunately, many sole traders are still experiencing financial distress and therefore cannot afford Bounce Back Loan repayments. If you are wondering where this leaves you, whether you are personally liable for the bounce back loan or what options you have regarding your bounce back loan repayments, read on.
How Do Bounce Back Loan repayments work for sole traders?
Depending on when you took out your Bounce Back Loan, it’s likely you have started, or are due to start, repaying your Bounce Back Loan. Both businesses and sole traders can repay their loan over a period of 6 years with an interest rate of 2.5% per annum after the first 12 months.
While repayments start after the first 12 months, your lender should contact you before your first payment is due with the following options:
- Extend the term of your loan to 10 years
- Move to interest-only repayments for up to 6 months – this can be done 3 times
- Pause repayments for a 6 month period – this can only be done once
While the above options provide some leeway for sole traders, it can still be a distressing time if you cannot afford to pay your Bounce Back Loan.
I can’t afford to repay my Bounce Back Loan
Sadly, as a sole trader, if you cannot repay your Bounce Back Loan you do not have the protection of a limited company. This is because, legally speaking, there is no distinction between personal and business assets. Therefore you are personally liable for the amount owed.
While no recovery action can be taken against your personal vehicle or home, you can still be pursued for outstanding bounce back loan debts and your personal assets may be at risk of recovery action.
Debt help for sole traders
If you cannot afford to repay the Bounce Back Loan and the above options from the scheme do not help then there are debt solutions available.
IVAs and Bounce Back Loans
An IVA (Individual Voluntary Arrangement) is a debt solution that allows you to “freeze” your debt and agree to pay them back over a period of months or years. At the end of the IVA (typically 5 years), any debt still outstanding is written off.
Applying for an IVA from a trusted debt solutions provider could protect you and your personal assets if you cannot repay your Bounce Back Loan.
If you are a sole trader struggling to repay your Bounce Back Loan, we recommend that you get debt advice from an expert advisor. A debt advisor will look at all your debts and work out the quickest and cheapest way of tackling the debts. You can book to speak with one of our experienced advisors here or use our free online tool for a no obligation way of finding a debt solution.