What should businesses do if they cannot afford to repay Covid borrowing?

Hillier Hopkins LLP

Chartered Accountants & Tax Advisers

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The government’s Bounce Back Loans and CBILs were a vital lifeline for many UK businesses during the depths of the coronavirus pandemic. Over £47bn was lent via the Bounce Back scheme with a further £26bn borrowed through CBILs.

Repayment terms were generous – over six years at low interest rates – with businesses now repaying that borrowing.

Yet the economic landscape continues to change and challenge businesses, with dramatic increases in energy prices, rising wage bills, constrained supply chains and rising inflation. With many businesses emerging from the pandemic with lower levels of working capital, it will not be surprising if some businesses struggle to meet scheduled repayments.

What should a business do if they believe they will struggle to meet repayments?

Bounce Back loans

Businesses experiencing difficulties in repaying Bounce Back borrowing can take advantage of a repayment holiday of up to six months. It should be noted, however, that this repayment holiday is only available once over the term of the loan.

A business can also look to extend the term of the loan from the original six-year term to a 10-year term at the same 2.5% interest rate, reducing the monthly repayment amounts. Both of these options can be combined.


Businesses with CBILs borrowing can also look to extend the original six-year term to a 10-year term, but the decision will ultimately rest with the lender. Businesses looking to change the terms of CBILs can also expect a lender to revisit interest rates. Both options will see a borrower end up repaying more money.

How Hillier Hopkins can help

All Bounce Bank Loans and CBILs borrowing under £250,000 typically did not involve any personal guarantee, yet businesses should think twice before choosing to walk away from those debts.

If borrowing was found to be used for personal use that would be considered fraudulent and could result in further investigations and prosecution.

If loans were taken when the business was in financial difficulties prior to the 2020 pandemic, the insolvency service has powers to pursue directors personally for unpaid debts.

CBILs are backed by a government guarantee but that does not absolve the business from its debt. That government guarantee only extends to 80% of the loan with the lender able to pursue the business for the remaining 20%.

Businesses that are struggling to repay Covid borrowing or believe they will shortly struggle should first speak to their accountant who can advise on the best route forward.

It may, for example, be possible to restructure that debt if the business is fundamentally sound, or advise on the appropriate way to place the business into insolvency proceedings.

If you need assistance on the above please get in touch with one of our experts on hi@hhllp.co.uk or +44(0)330 024 3200.