Bounce Back Loans (BBLs)

Whilst Bounce Back Loans (BBL) were a welcome saviour to many UK business during the Covid-19 pandemic, companies now find themselves struggling to keep up with repayments.

So, what happens if you find yourself in a position where you can’t afford to repay your BBL or Coronavirus Business Interruption Loan Scheme (CBILS)?

To say it how it really is – your company may well be insolvent due to an inability to meet liabilities as and when they fall due.

The Cash Flow Test vs The Balance Sheet Insolvency Test

Most companies fail on the cash flow test, rather than being ‘balance sheet insolvent’.

The cash flow test essentially looks at whether a company’s able to pay its bills on time (debts and expenses). Can’t pay? The company’s deemed insolvent.
The balance sheet insolvency test looks at the company’s assets (property, machinery, stock etc.) and weighs them up against your liabilities (debts) – now and in the future. If the debts are more than the value of the assets – the company’s classed as insolvent.

Risks for Company Directors

Insolvency will put directors at risk. The earlier the problem’s addressed, the more chance of rescuing the company from its difficult position. By talking to authorised insolvency experts, you’ll better understand how it changes your responsibilities as a company director, and find out what your options are, which may include Administration or a Company Voluntary Arrangement, for example.

The important thing to note is – there are options. It doesn’t always have to mean the end of the road.

At FTS Recovery, we believe there are no silly questions. It’s a troubling time and we know many directors take the ostrich approach (burying your head in the sand), to try and ignore negative financial news. Rather than being an ostrich, it’s wise to settle on a course of action, such as letting go of a losing position that’s been on a downward trend for some time. If your company’s experiencing problems in repaying loans, our empathetic and experienced team will help you navigate the murky waters.