Bounce back loans

How to use your Bounce Back loan

The Treasury have warned that fraudulent use of the Bounce Back Loan will be prosecuted as allegations are rife in the press that the scheme has been abused. Many small and medium size businesses have made use of these loans but many business owners are perhaps not aware of the rules surrounding what the money should be used for. This issue is discussed in more detail in our article The Bounce Back Loan – is it a ‘bouncing bomb’?

It’s a complex issue, which is perhaps why it’s not received the attention it deserves, but business owners who receive BBLs have an interesting dilemma when they get their hands on this seemingly easy to acquire cash. Beyond the attention-grabbing headlines of those tempted to splash it all on fast cars (there have been quite a few), there are others who have already or are about to unwittingly store up trouble for themselves further down the line by doing what they think is the right thing.

Should you use your Bounce Back loan to pay off company debt?

Many may well be tempted to use the loan to pay down company debt to get landlords and creditors off their back for a while. This sounds reasonable but what they may not realise is that, if their company is already in an insolvent position (many are without knowing it), there are strict rules about the order in which creditors are paid. If paid in the wrong order, directors may well open themselves up to investigation, and they may be prevented from striking their company off at a later date and will have to take an insolvency route out of their troubles. They could even end up with personal liabilities.

How can we help?

At FA Simms & Partners we are seeing a spike in enquiries from business owners who have spent their Bounce Back Loans loans and are wondering, what next? In a growing number of these cases, we are having to track back to the company’s last point of solvency – the date an insolvency investigation will go back to – to unpick the mistakes that have been made since. Rectifying the issues typically involves finding additional cash to ensure creditors are paid in the appropriate order. It’s often not an easy process.

We want to get the message out loud and clear that the best way to use a Bounce Back Loan is to spend in on business recovery. This means investing in getting your business trading again. Don’t use it solely to pay off debt. Instead, negotiate with creditors and landlords to get them off your back. In many cases they will be supportive and provide the breathing space for a business to find its feet again. And even if they are not supportive, there are still options. Using a loan to pay the most demanding creditors off is often the wrong solution. It’s crucial to keep money back to restart a business when the time comes. If in doubt, seek professional advice.


Richard Simms is the MD at FA Simms & Partners , a business rescue and insolvency firm with offices across the UK. FA Simms & Partners has opened a helpline to offer free-of-charge consultations for business owners who think they may have misspent their BBL or who are looking for advice on how best to spend it. Call 01455 555650 for support. Richard Simms also publishes this website, which is dedicated to providing small business owners with free and impartial advice as they navigate their way through the many challenges of the COVID-19 pandemic.

This article was published in the business section of The Yorkshire Post on Thursday 25Th June 2020

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