Can my company write off its CBILS loan?

A loan obtained through the Coronavirus Business Interruption Loan Scheme (CBILS) remains non-negotiable for write-off during active trading. Nevertheless, the possibility of renegotiating repayment terms exists. The sole circumstance under which your CBILS loan could be written off is if the company faces insolvency and proceeds to liquidation.


What happens if my company can’t repay a CBILS loan? 

The Chancellor introduced the Coronavirus Business Interruption Loan Scheme (CBILS) at the onset of the pandemic, with the government providing an 80 per cent guarantee for the loans.

CBILS loans up to £250,000 did not necessitate personal guarantees. However, some lenders did request them, and this factor becomes crucial when assessing the potential for your CBILS loan to be written off.

If you have furnished a personal guarantee to your lender, they are likely to enforce it in case the company falters and cannot meet the repayment obligations. Understanding the implications of this and exploring measures to enhance your company’s financial situation becomes pivotal.


What if your company cannot afford to repay a CBILS loan?

The responsibility for repaying the loan falls entirely on your company as long as it remains in operation, given that the 80 per cent government guarantee is in favour of the lender, not the borrower. Numerous businesses are grappling with cash flow challenges post the Covid pandemic, and meeting the repayment obligations of your coronavirus business loan may be proving challenging.

In the event that the company deteriorates to the point where liquidation becomes the only recourse, there might be a potential avenue for writing off the loan. CBILS loans are unsecured, and it is improbable that the company will possess adequate funds to settle it entirely after the liquidation of assets.


Personal liability for a CBILS loan

There are situations in which a director might assume personal liability for a coronavirus loan, particularly if a personal guarantee has been furnished.

1. Personal guarantees and CBILS

The government extended some protection for company directors concerning personal guarantees for CBILS loans:

  • For loans exceeding £250,000, a director’s Principal Private Residence could not be utilised as security. 
  • The lender is limited to recovering only 20 per cent of the outstanding amount through a personal guarantee, and this can only occur after the proceeds from the sale of assets have been applied.


2. Director misconduct

When a company undergoes liquidation, an inquiry into director conduct is standard procedure to determine the reasons behind the business’s failure. If misconduct surfaces during the investigation – for instance, if the loan was not employed for the economic benefit of the business or if there were irregularities on the application form – it may expose a company director to personal liability.

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What can you do if you’re struggling to repay your CBILS loan?

If your business is encountering difficulties in repaying its coronavirus loan, there could be several options at your disposal, such as: 

I. Alternative finance

One option is to secure funding from an alternative financier, like a factoring firm or invoice discounter. This can substantially enhance working capital, particularly for businesses with a robust sales ledger. Additional alternative lenders include asset-based financiers, who might provide your business with a substantial lump sum of working capital if it possesses assets of significant value.

II. Debt restructuring

An alternative choice could be to embark on a Company Voluntary Arrangement or CVA. This involves restructuring your debts to render monthly payments more manageable for the company as you navigate through challenging times. A CVA typically spans up to five years and is apt for companies facing temporary cash flow challenges.

III. Company administration

Company administration could also serve as a potential path out of financial difficulty, particularly when your company is under significant creditor pressure. Opting for company administration provides an eight-week moratorium on creditor action, shielding you from a creditor’s winding-up petition.

For additional information and impartial professional advice on your CBILS loan, along with support for the subsequent steps, please reach out to our expert team. Vanguard Insolvency specialises in insolvency and can offer the guidance necessary in this situation. We provide free, same-day consultations and operate an extensive network of local offices across the country.

David Jackson MD
Senior Partner at Vanguard Insolvency Practitioners | Website

I am an insolvency professional with a distinguished career specialising in commercial insolvency, adeptly navigating Creditors Voluntary Liquidation, Company Voluntary Arrangements, and Company Administrations. With a comprehensive understanding of insolvency laws and an unwavering commitment to ethical practices.