Can A Company Write Off A Bounce Back Loan?

Dan Nailer
Dan NailerLegal Assessment Specialist
Updated on 30th April 2024

The Bounce Back Loan Scheme was introduced in May 2020 to aid small and medium-sized businesses hit by the pandemic.


These loans aimed to provide quick access to funds, up to 25% of the business's turnover, through accredited lenders. Although the government set the interest at a low rate of 2.5% annually and deferred repayments for the first 12 months, businesses are still responsible for repaying the full loan amount plus interest.

If you're struggling with Bounce Back Loan repayments, you might wonder if it can be written off. In this article, we'll explore your options and provide guidance on how to move forward.

Can a Bounce Back Loan be written off?

To write off a Bounce Back Loan, your company must go through the proper insolvency and liquidation procedure.

In liquidation, the loan becomes unsecured debt, and the government repays it to the lender.

However, if your company doesn't repay the borrowed money, even if it's dissolved, it may be investigated by the Insolvency Service. If it's discovered that the loan wasn't used correctly, directors could be held responsible for repayment.

Can you write off a Bounce Back Loan if you are self-employed?

To write off a Bounce Back Loan as a self-employed individual, you need to go through a formal process called an Individual Voluntary Agreement (IVA).

During this process, the Bounce Back Loan is treated as unsecured debt, which can be part of the arrangement. However, this doesn't mean the entire debt disappears. You'll still need to repay an agreed-upon amount, and any remaining unpaid unsecured debt is then written off.

If an IVA isn't an option for you, and you can't repay your Bounce Back Loan, you might be personally responsible for the debt. However, there are protections for sole traders or small partnerships under the Bounce Back Loan Scheme. Specifically, no recovery action can be taken against your main home or primary personal vehicle.

What are the alternatives to writing off a Bounce Back Loan?

To help businesses struggling to repay a Bounce Back Loan, the government introduced Pay As You Grow options. These include:

  1. Extending the loan term to 10 years.

  2. Taking a 6-month repayment break.

  3. Paying interest only for 6 months (up to three times in the loan term).

Using these options can make repayment easier, but it increases the total debt owed.

Can you dissolve or strike off a company with a Bounce Back loan?

If you're looking to close your company but still have a Bounce Back Loan to repay, there is a way to handle the debt and shut it down by liquidating the company.

This means your company's assets are sold off to pay creditors, including the Bounce Back Loan debt. Once this is done, the company is legally dissolved.

It's not recommended to dissolve a company by striking it off the register if it still has outstanding debts.

Are directors personally liable for Bounce Back loans?

If the Bounce Back Loan was used for the benefit of the business, directors typically aren't personally liable if the company can't repay it.

However, if the loan was used for personal expenses, such as holidays or personal debts, directors may be held personally responsible.

How can Lawhive help?

Financial difficulties can be stressful, whether in your personal life or business.

If you're facing questions about insolvency, liquidation, or bankruptcy, our network of small business lawyers is here to help. We offer quick, affordable advice to guide you through your options.

For a free case evaluation and more information, contact our Legal Assessment Team today.

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