30th August 2022
A recent report by BBC News declared that thousands of small firms go bust owing millions in bounce back covid loans. This isn’t the first-time that concerns about bounce back loans have been raised and it seems unlikely the situation will improve any time soon.
What can you do if you are having difficulty repaying your bounce back loan?
Why are bounce back loans causing problems?
Bounce back loans are government-backed loans that were introduced during the pandemic to support businesses which were dealing with extreme financial challenges, with many firms seeing their income stopped or reduced significantly overnight.
Many businesses took advantage of the loan scheme, with 1.5 million bounce back loans being granted. But 16,000 businesses that took out loans have since gone bust without paying back the loan.
It also transpires that many of the directors that applied for these loans weren’t even entitled to them. Research has shown that 45% of successful applicants to two banks showed no evidence of trading in the relevant period, but they still received loans.
As many people start asking questions about how the money given out under the scheme will be recovered, it’s now thought that as much as £17bn could be lost to fraud, mistakes and company insolvencies.
What if you can’t pay back your bounce back loan?
In my blog, I recently talked about your options if you are having trouble paying back your bounce back loan. For many businesses, trade has been slow to return to pre-pandemic levels, if at all, and the financial burden of mounting debts is taking its toll.
One of the initial concerns about bounce back loans was the lack of rigour applied when granting loans. While the government was keen to act quickly to get aid to those businesses that needed it, the affordability checks normally applied to loans were not done, with directors able to self-certify applications.
For many directors, this was done in good faith and loans were used to sustain businesses during the toughest times, but as we see cost rise, inflation continues to grow and warnings of a recession grow louder, the hoped-for rebound after restrictions eased still seems a long way off.
Without the economic turnaround many businesses were looking for it seems likely more bounce back loans will remain unpaid when even those businesses with every intent to repay their loans find themselves continuing to struggle, and in no position to do so.
I know from my own personal experience of debt how difficult it is to face and tackle debt. Talking to someone about debt is difficult but it’s the first step in taking back control of circumstances and regaining your physical and mental wellbeing.
Help and support are available to help you manage your financial situation. No matter your debt situation, it’s never too early, or too late, to ask for help and advice.
James Rosa Associates
James Rosa associates is a firm of debt advisors and debt adjustors. With a supportive and friendly approach, we offer a full range of advice and professional services to individuals and business owners/directors who face unmanageable debts or who are involved in civil or commercial disputes. Our services include:
We are authorised and regulated by the Financial Conduct Authority (FRN665061) to work with clients to produce bespoke solutions to fit their specific circumstances.
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