Slater Byrne Recoveries UK

UK Businesses Struggle to Repay Government Coronavirus Loans

The UK government’s Coronavirus Loans — Coronavirus Business Interruption Loan Scheme (CBILS) and Bounce Back Loan Scheme (BBLS) — were lifelines for many businesses during the pandemic. They provided crucial financial support, helping businesses stay afloat and protecting jobs. However, with repayment deadlines approaching, some companies are facing difficulties keeping up with their obligations.

This article aims to clarify the repayment landscape for these loans and offer guidance to business owners struggling to meet their financial commitments.

Understanding the Coronavirus Loans Differences

  • CBILS:  Offered loans of up to £5 million to established businesses. Lenders may require a personal guarantee from directors, meaning they could be held personally liable for a portion of the debt if the business fails to repay.
  • BBLS: Offered smaller loans (up to £50,000) with a faster and simpler application process. Importantly, no personal guarantees were required for BBLS loans. There is no automatic director liability; however, this doesn’t absolve the business of its repayment responsibility.

Repayment Challenges and Potential Consequences

Despite offering breathing room with initial repayment holidays, some businesses are finding it difficult to manage Coronavirus loans repayments alongside ongoing operational costs. This can be due to factors like:

  • Slower-than-expected recovery: The economic impact of the pandemic lingers, with some industries still experiencing reduced demand.
  • Rising operational costs: Supply chain issues and inflation are pushing up costs for many businesses, making it harder to generate sufficient profit for loan repayments. Fabric and wallpaper company Osborne & Little is reported to have breached the terms of their Covid business loan after profits slumped 98% in 2023 due to increased costs and poor sales in the UK and Europe.
  • Damage to credit rating: Defaults are reported to credit bureaus, significantly impacting your ability to secure future loans for business growth or expansion.
  • Debt recovery action: Lenders may resort to legal action to recover the debt, incurring additional fees and potentially leading to insolvency proceedings.
  • Failure to repay a government-backed loan can have serious consequences for your business, including being struck off as company director for abuse of the Covid-19 schemes.

Protecting Your Business and Personal Assets

We understand that navigating financial challenges can be overwhelming. Here’s what you can do:

  1. Be Proactive: Don’t wait until you miss a payment. If you anticipate difficulty repaying your Coronavirus loans, contact your lender immediately. They may be able to offer flexible repayment options or payment holidays to ease your burden.
  2. Seek Expert Guidance: Debt collection agencies like ours have experience working with businesses facing financial difficulties. Our accounts managers can analyze your financial situation and explore potential solutions to manage your debt.
  3. Prioritize Communication: Maintain open communication with your lender throughout the repayment process. Keeping them informed demonstrates your commitment to resolving the situation.

Remember, your personal assets are at risk with CBILS Coronavirus loans

If you have a CBILS loan with a personal guarantee, failure to repay the loan could lead to the lender pursuing your personal assets to recover the debt. This could include your home, car, or other valuable possessions. In March 2024, Zaman Shaa, owner of a Chutneys Indian takeaway food in Salisbury, was sentenced to 36 weeks in prison and was disqualified as a director for two years.

Act Without Delay

There’s a limited window to address repayment challenges before they escalate. By taking proactive steps now, you can protect your business from serious consequences and safeguard your personal finances. Don’t let your government business loan become a burden. Contact Slater Byrne Recoveries today for a free consultation with one of our experienced accounts managers. We can help you understand your options and explore solutions to manage your debt effectively.