How to write off a bounce back loan as a sole trader

The 2020 bounce back loan scheme was a lifesaver for many. It was a loan guaranteed by the government of between £2000 and £50,000, designed to help small businesses suffering from the impact of coronavirus.. It provided low interest rates and delayed the first payment to twelve months after the funding was secured. The scheme released £46.59 billion in funds, with 72.42% of that money now either fully repaid or on track to be repaid on time. 

While many businesses found this scheme to be invaluable, some may still be struggling today to return the money they borrowed. In fact, 1.07% of these loans have already resulted in a default. 

If you’re struggling to repay the bounce back loan, then keep reading for tips on how to navigate these difficult times.

Can you write off a bounce back loan as a sole trader?

You cannot simply write the loan off as a sole trader. However, there are measures you can take if you are truly struggling to return the money.

For starters, you can enter into an Individual Voluntary Arrangement. This is an agreement made between you and your lenders where you pay back a monthly amount you can afford over the course of five years. At the end of the five years, whatever is left is written off.

Another option is declaring bankruptcy. Any assets you own are sold off and the money is used to repay your loans, with any remaining loans written off after twelve months. Doing this can involve frozen bank accounts, loss of your vehicle or home, and a serious impact on your credit score and ability to borrow in the future. Declaring bankruptcy as a sole trader will likely result in your business being closed.

Declaring bankruptcy and considering an IVA are both serious decisions and have consequences. Before considering an Individual Voluntary Arrangement (IVA) or declaring bankruptcy, you should seek independent legal advice to understand the full implications and ensure it is the right option for your financial situation.

What could you do instead of trying to write off the loan?

It may be better to try to work with your lender to repay the bounce back loan. Here are some measures you might like to try first before entering into insolvency:

• Ten year extension: The bounce back loan repayment period can be extended from six years to ten years without impacting the interest rate. Consider contacting your lender and requesting an extension if you haven’t already.

• Repayment holiday: You can take a six month long repayment holiday if you’re struggling to pay today. This option is only available once.

• Pay interest only: Another six month option involves only paying the interest rather than the full loan repayment amount for half a year. You can do this up to three times.

• Call Business Debtline: The Business Debtline supports UK businesses in a range of ways, including providing advice for small businesses struggling to repay their loans.

Get a sole trader business loan with Funding Option by Tide

All businesses face difficult times and if you need to talk to someone, our support team is here to help you through the journey of growing and maintaining your business. 

If, however, you are in a time of growth, we help eligible sole traders find funding solutions for their business requirements, whether that’s asset finance to purchase a new company vehicle or a credit card to fund monthly inventory purchases. Simply click the link below to find out if you’re eligible for a sole trader business loan.

Apply for a sole trader business loan

Please note that the information above is not intended to be financial advice. You should seek independent financial advice before making any decisions about your financial future.

It’s important to remember that all loans and credit agreements come with risks. These risks include non-payment and late-payment of the agreed repayment plan, which could affect your business credit score and impact your ability to find future funding. Always read the terms and conditions of every loan or credit agreement before you proceed. Contact us for support if you ever face difficulties making your repayments.

Funding Options, now part of Tide, helps UK firms access business finance, working directly with businesses and their trusted advisors. Funding Options are a credit broker and do not provide loans directly. All finance and quotes are subject to status and income. Applicants must be aged 18 and over and terms and conditions apply. Guarantees and Indemnities may be required. Funding Options can introduce applicants to a number of providers based on the applicants' circumstances and creditworthiness. Funding Options will receive a commission or finder’s fee for effecting such finance introductions.