(Newswire.net — July 8, 2022) –There is actually no option to just not repay the loan. It’s likely that your lender will follow your company for repayments. Moreover, in a worse scenario, you will take further legal action if you don’t make payments when they’re due. Let’s repeat the question- do you have to pay back the bounce-back loan. Yes! Burying your head in the sand or refusing to comply with expectations would probably only lead to further confusion, stress, and increased pressure from your lender.
What happens if I shut down my business before repaying the bounce-back loan?
Let’s examine an illustration:
On June 1, 2020, your business took out a bounce-back loan for £50,000 with a six-year duration. The 12-month business interruption interest-free term will end on May 31, 2021.
As a result, you decide to close down your business because it is no longer profitable.
Now, keep in mind that the loan provider is a creditor, and you simply cannot liquidate your business unless all creditors have been paid in full or overdrawn directors’ loan accounts are not back in a good state.
There is a process involved in the liquidation of a solvent corporation, and as part of that process, creditors are given a chance to speak out and object to the solvent liquidation if their debt has not been paid off or satisfactorily resolved.
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What will happen if you fail to pay your bounce-back loan?
Technically, not paying back your bounce-back loan has no serious consequences. It won’t cause you to lose any assets, and it won’t have a negative impact on your credit rating either. Firstly, applying for the loan program does not require passing a credit check.
However, some banks do indicate that they will eventually consider defaults when approving ordinary loan applications. The government also gives instructions to bank lenders on how to reclaim loan payments. Additionally, they stress that they have been clear that these loans must be repaid, not merely grants that can be canceled if SMEs fail to make payments. Furthermore, the final decision about the loan’s approval still rests with bank lenders.
Banks would similarly pursue unpaid bounce-back loans as to how they would follow any other unsecured loan in an effort to recover their losses. Dealing with debt collection agencies, legal proceedings, and possibly debt collectors could be involved.
A board of debt collection organizations that would all abide by a common code of conduct has been discussed by the government and banks. This is so that lenders can only make use of the government’s full guarantee after trying everything else to collect a debt.
The sooner you repay your debt once interest has been added, which you can do without incurring penalties, the less it will ultimately cost you.