Has your firm had some bumps along the road owing to the off-season or other circumstances? Has the ongoing COVID-19 pandemic had a negative influence on your company’s financial health? Don’t be concerned!! Perhaps it’s time for your company to consider bounce-back financing. Let us understand more about it before we go any further.
What Is A Bounce-Back Loan?
During the COVID-19 pandemic, the government offered small businesses bounce-back loans to help them access emergency finances. The bounce back loan can be used to pay employee salary, assist with rent and business rates, and address other monthly business costs or overheads such as power bills. The loan amount might also be used to refinance other business debts. Because the bounce-back loans are interest-free for a year, they lift a significant burden from the shoulders of business owners who have been submerged by the pandemic’s consequences.
Furthermore, because they are backed by the government, the lenders are willing to provide the loan amount. Once the interest-free loan period is up, there is a 2.5 percent annual interest rate, and repayments can be spread out over up to ten years. Are you concerned about what may happen if you are unable to repay your bounce-back loan? Continue reading to find answers to your questions!
What Happens If A Company Fails To Repay A Bounce-Back Loan?
Borrowers are not liable to lose assets if they default on the loan because they do not provide any guarantee or collateral as a security for the loan amount. Lenders will usually pursue defaulting borrowers and may make loan payback terms more lenient. This can involve things like extending loan terms and a whole lot more.
Furthermore, failing on the loan amount can result in the company being dissolved in order to recoup the loan amount. If the business is still not functioning as expected in the market after receiving the bounce-back loan, the procedure of dissolving the corporation is also accelerated. This simply means that the company’s business plans aren’t strong enough to compete.
Because the bounce-back loans are backed by the government, lenders have the power to pursue government officials if they fail to finalize fresh transactions with debtors.
Is It Possible To Liquify Your Business?
It is impossible to regain a company’s productivity and revenue when it is not doing properly and unable to repay the bounce-back loan. In such instances, closing the business or dissolving it appears to be the wisest option. Insolvency specialists sell the company’s assets to repay the loan firms throughout the liquidation process. However, the lender should not anticipate to recover the entire loan amount and should instead aim to pursue the government for a refund.
Although a bounce back loan can assist your small business in the event of a financial emergency caused by the pandemic, if the loan is not repaid on time, the company may be forced to close. Now that you know what happens if you can’t pay back your bounce-back loan, it’s more important than ever to get mindful liquidation advice and make wise financial decisions for your company.
