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None of which are going to make the business of just doing business any easier. 

With less than 12 weeks to go until 2022 is upon us, this might be the most critical trading period ever for some companies. 

It might very well be make or break for some businesses. If they don’t have a bumper Autumn and Christmas trading period then the new year might start with them looking at closing their business down for good and dealing with their outstanding debts and creditors. 

This also includes bounce back loans that might have been taken out to support the business during the height of the pandemic and lockdown but have now come due and in many cases are overdue. 

So we’ll answer some of the more frequent questions we’ve been getting from directors looking to restructure or close their businesses but are reluctant to proceed because of their bounce back loan debt. 


Will directors be personally liable for repaying bounce back loans in liquidation?

Because the bounce back loan was designed to have inherent flexibility and be potentially used in several different but legitimate ways by businesses, it was not designed for a single purpose or use. 

Primarily this was to provide an economic benefit to the business during the pandemic which could include replenishing stock, paying staff wages (separate from staff that have been on furlough), buying new machinery or bolstering its cash flow position either through paying down debt or building their savings.

Forthcoming law changes included in The Ratings (Coronavirus) and Directors Disqualification (Dissolved Companies) Bill, while specifically being aimed at directors that have tried to dodge their legal responsibilities, might confuse and scare those business owners that have been doing their jobs and now think they might be held responsible for outcomes outside of their control. 

The new bill will let the Insolvency Service specifically target and pursue those directors who acted either unethically or illegally.   

The main measure sees the Insolvency Service given retrospective powers to investigate the directors of closed and struck off companies and how they acted in the days, weeks and months before their dissolution. 

Any director or business owner that can demonstrate how the money was spent on legitimate company activity will have little to worry about from the Insolvency Service. 

If the money was used to fund personal purchases or was given to family members for example then they could very well find themselves being made personally liable for the outstanding amount if the business can’t repay it’s bounce back loan arrears. 


Do I have to liquidate my business if I can’t pay back the loan straight away?

If a business could have a viable future but can’t meet all its obligations at once including bounce back loans this doesn’t automatically mean that the company has to go into liquidation.

If HMRC are one of the creditors then a Time to Pay (TTP) arrangement can be negotiated. 

This is a formal payment plan usually spanning 12 months which is at an affordable level for the company to make and keep up. 

Of course depending on the size and types of the debts and creditors a more formal insolvency process like an administration or Company Voluntary Arrangement (CVA) might be more appropriate 


Is liquidation possible with a bounce back loan?

Yes!

A business with an outstanding bounce back loan that it has no realistic chance of repaying can still be closed down or liquidated but only if it follows a certain procedure. 

If the business becomes insolvent then the outstanding balance will be included in the process alongside any other unsecured debt and treated the same way. 

A Creditors Voluntary Liquidation or CVL will usually be the method the licensed insolvency practitioner will use to progress closing down the company. 

They have several legal tasks to fulfill while they complete their duties including compiling a report on directors actions leading up to the insolvency and identifying which creditors are owed what amount and how much any existing assets can be realised for to go towards paying off these debts. 
      
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Directors will not personally have to repay any of these company debts unless they have entered into personal guarantees to obtain them or if the Insolvency Service subsequently discover cause for further punishment based on their investigations. 


The next few months might raise more questions than answers for a lot of business owners and directors struggling to keep their firms on an even keel.

We’d like to think that we can help them find the answers they’re looking for no matter what conundrums they have to cut through. 

Our free initial consultation is the starting point for them to work through their specific and unique situations with one of our team of experienced, expert advisors. 

We can then work together to come up with a comprehensive package of options and solutions that can begin to be implemented straight away to bring about the necessary changes needed. 

Get in touch with us today and we’ll get busy making sure that tomorrow will provide some answers you’ll like. 

 

As home working became the enforced norm for millions, home shopping followed and home deliveries rocketed as a result. 

The haulage industry stepped up to keep supplies running while the warehouses worked with customary efficiency to get packages out as quickly as they were coming in.  

The postal and courier delivery services stepped up and became a nearly daily feature of our lives, accepting packages for neighbours if we weren’t expecting and receiving them ourselves.

It’s difficult to think of any goods transported in the UK that aren’t involved in road transport in some way.  

According to the Road Haulage Association (RHA) some 89% of goods are estimated to be directly moved by road and the 11% that aren’t will still require some road connection in their journeys between ports, airports and rail terminals. 

The sector is the UK’s fifth largest employer and 2.54 million workers alone keep the haulage and logistics businesses operating. 

But cruelly, just as the final government support measures are being withdrawn, transportation businesses are suffering. 

In the latest business insights bulletin from the Office of National Statistics, more transportation and shipping companies are likely to have paused trading or shut down altogether than any other sector with just 82% of them operating as normal. 

The report found that 9.1% of transport and storage firms have permanently ceased trading, while 8.5% are paused.  

The average across the wider UK economy is 3.4% of businesses have closed for good while 7% have closed temporarily.

It found that the high percentage of paused and not permanently ceased traders was partly driven by the freight transport by road industry and the unlicensed carriers industry which is experiencing a shortage of lorry drivers. 

The knock-on effect of these and other issues means the national supply chain is affected with 7% of UK businesses unable to get materials and staff in the last fortnight with others forced to switch suppliers or make alternative arrangements. 

Rod McKenzie of the RHA said that in the short term drivers’ pay is increasing to stimulate demand but: “This in turn is a cost that will need to be passed on, and given the tight profit margins of most haulage operators that means their rates to customers will have to go up.

“In turn, this may mean more of us paying higher prices for goods, services and shopping - including food prices - going forward.”


Who kept the show on the road?

According to the figures from March 2019 to February 2020 - there were 527 insolvencies involving businesses in the transportation sector. 

In the immediate 12 months afterwards from March 2020 when the first nationwide lockdowns were implemented to February 2021, there were 382 closures in the sector. 

Now, according to official statistics supplied by the Insolvency Service, there have been an additional 156 transportation sector insolvencies since March this year which takes the total number since lockdown to 538 - which is 33 a month or over eight a week pulling down their shutters for the final time. 

Ominously, 51 businesses in the sector became insolvent in June this year, the last month figures were available for, the largest monthly total recorded since March 2020.

Did bounce back loans soften the blow?

Many transportation companies took advantage of the support options available to them throughout the pandemic and recovery period. 

Many furloughed staff rather than making them redundant and others looked for government-backed borrowing sources such as bounce back loans or CBILS to help them through this unprecedented period. 

The number of bounce back loans taken out by UK transportation services was 77,920 with a total amount borrowed of £2 billion.

This is an average loan amount of £25,667 per company.  

Under the most conservative official estimates, it’s expected that 15% of the total lent to the industry would remain uncollected would be £300 million but if the default rate rose to even 40% then this figure would also grow to £1.2 billion. 


Companies with bounce back loan arrears can still close - find out how


Now the end of the line for the furlough scheme is in sight and while the temporary suspension on winding up petitions is being lifted to an extent, it will come with a £10,000 price tag until the end of March 2022 meaning some, but not all, creditors will stay their immediate legal attempts to force repayment. 

Of course this doesn’t apply to any bounce back loan arrears or other borrowing amounts which have yet to be repaid. Nor will it impact on owed VAT arrears or stop business rates being reapplied to companies with physical properties. 

Chris Horner, Insolvency Director with BusinessRescueExpert.co.uk thinks transportation businesses have a bumpy road to travel in the near future. He said: “Despite performing heroically during the pandemic and lockdown, the sector has been hit with a triple blow almost instantaneously. 

“An unlucky combination of Covid-19, Brexit red tape and personnel shortages means a lot of businesses in the sector are facing dire financial conditions just when they should be gearing up for the busy Christmas and new year period.

“Unfortunately the timing of these issues are hurting a lot of otherwise viable transportation firms. Bounce back loan and VAT arrears are building and the lenders will be taking more active steps to recover this debt.

“One thing transport and logistics businesses can do is move quickly when they need to and if they can arrange some professional advice and act on it, they might still be able to make the necessary changes and protection to get back to doing what they do best and keeping the country literally on the road to recovery.”


Any business owner or director of a transportation focused business will tell you that logistics only works when there are no blockages in the system. 

One hold-up can affect the whole network, impeding every channel until the problem is solved or removed. 

But once it’s cleared, the recovery is usually quick and normal productivity and services are functioning again swiftly.

So it is with business rescue and restructuring. Once the biggest problems are identified and solved, upward progress usually follows in short order. But only when they’re dealt with. 

We offer a free initial consultation to directors and business owners to identify what problems are holding their companies back and we’ll work with them quickly and efficiently to diagnose the most effective solutions. 

The remedies can often be put into practice immediately but they can only work if the management seizes the chance to take action before it’s finally too late to change. 

construction

Stress might be one of the most misapplied words in common usage. 

Any good construction professional will be able to explain that stress is a temporary force acting on structure while strain is a permanent change - either in shape or size - directly resulting from the pressure of that stress. 

A little stress can be a good thing as it can prove that a design or structure is working as it’s meant to. It’s when it becomes a strain that more serious issues can occur. 

So has the previous 18 months caused the construction industry severe stress or has it turned into a permanent strain on the sector?


Year of Lockdowns

No UK industry was more badly affected by the pandemic than the construction industry. 

From March 2020 when the first lockdowns were instituted to the end of March 2021 more than 1,600 building firms closed down permanently. 

This is higher than both the hospitality and retail - two sectors previously thought to have fared the worst since the pandemic began. 

1,634 firms in construction went under during this period compared to 1,378 in hospitality and 1,355 in retail. 

In our Year of Lockdowns report, we broke down how the pandemic had affected every aspect of life across the country for businesses, their owners and staff. 

We found that the halting of various large and small scale building projects had badly damaged all elements of the construction industry. 

According to official Insolvency Service statistics, there have been an additional 596 construction insolvencies since March taking the total number since lockdown to 2,230 or 34 a week.

In this month alone, Darlington based Cleveland Bridge and All Foundations, one of the country’s top piling contractors, entered administration while Mansfield based Minister and AM Griffiths from Wolverhampton ceased trading altogether and went into liquidation. 

Sadly, they will be joined by other notable names this year.


Loans granted but will construction bounce back?

The various government support schemes greatly benefited construction during the past 18 months. 

The coronavirus jobs retention scheme, better known as furlough, allowed them to retain some of their most valuable staff while sites and projects shut down and borrowing such as CBILS and bounce back loans allowed them to quickly access funds to support themselves. 

Especially bounce back loans. 

The construction industry collectively accessed the most bounce back loans of any sector with nearly a quarter of a million bounce back loans granted - 238,825.

The total amount borrowed was £7 billion, second only to the retail industry, which is an average borrowing total of £29,310 per company.  

Under the most conservative official estimates, it’s expected that 15% of the total lent to the industry would remain uncollected which is a not inconsiderable £1.05 billion. 

This doesn’t just affect large contractors and builders but many sole traders and partnerships too, which make up a large proportion of the industry.


You can still close your company even if you have bounce back loan arrears - find out how


Next month sees a further bottleneck of trouble brewing for already struggling builders. 

The coronavirus job retention scheme better known as furlough is finally wound up meaning businesses will either have to decide to welcome workers back on full wages with no government support or consider redundancies. 

Bounce back loan and CBILS payment arrears will continue to be demanded along with any unpaid VAT arrears from 2020.  

Also certain creditors actions are set to resume on September 30th allowing creditors to seek statutory demands and winding up petitions for unpaid debts and a further small but critically important protection for constructors is also being removed. 

Termination clauses were suspended which stopped suppliers from ceasing their supply or asking for any additional payments or security from businesses that are undergoing a restructuring or administration process. 

From the end of next month they will be able to once again, which will place further strain on otherwise viable but struggling companies and potentially lead to more disorganised and chaotic collapses rather than professionally managed recovery strategies and business rescue plans. 

Chris Horner, Insolvency Director with BusinessRescueExpert.co.uk spotted this specific danger last month when he said: “Construction companies that rely on the guaranteed availability of materials could quickly find themselves in difficulty if suppliers start to use these newly restored rights, right away.

“Due to the actions of a supplier, otherwise profitable businesses could find themselves trading while insolvent through no fault of their own. 

“If a builder, civil engineering practice or other vital part of the construction industry that underpins so much of the country’s infrastructure is now worried about what these changes will mean, we can help reassure them.

“There is a small window of opportunity for them to act - right now - before September 30th.

“We can help them formulate a recovery strategy for their business that will protect them into the Autumn months and beyond. 

“This includes if they have bounce back loan arrears, CBILS debt, VAT arrears or other unsustainable debts that have built up over the previous 18 months.” 


Construction businesses naturally have a genius for delegation. 

Not just using the right tool for the job but the right subcontractors, the right workers and the right people in the right places at the right time. 

We employ the same principle for businesses facing financial difficulties. 

Speak to an expert who can give you a quote and let you know exactly what they would do, when, how, why and then deliver on their promises.

The sooner a business owner or director gets in touch to arrange a free initial consultation, the earlier we can let them know what options they have and the quicker they can be implemented. 

Rules, regulations and trading conditions will change next month along with the seasons so act today so you won’t be caught out tomorrow. 

Collectively, the pubs, hotels, restaurants and nightclubs of the UK have endured possibly the hardest 18 months they will ever experience.  

Many haven’t opened their doors at all, have had to furlough staff and rely on other government backed support such as bounce back loans or CBILS borrowing and grants.

This has led to over £10 billion of collective pandemic debt being built up by these businesses. 

Now, as the government prepares to hand over responsibility on Covid protection measures to these individual businesses, representatives of the hospitality, retail and property sectors have asked MPs for further additional, targeted support measures based on their experiences. 


Are nightclubs facing a knife edge?


Their wish list includes:

Members of the Business Select Committee heard from representatives of the various sectors this week to gain a fuller picture of the reality facing reopening businesses.

The British Property Federation put forward evidence that 25% of commercial landlords and tenants had yet to reach an agreement on repaying an estimated £6.5 billion in unpaid rent.

They warned that if no solution is found by the end of March 2022, when the moratorium on evictions for commercial tenants ends, then there could be widespread legal action and subsequent consequences for businesses that are delinquent. 

The committee acknowledged that the government was planning on introducing some binding arbitration rules regarding outstanding rent soon but no further details have been announced. 


Kate Nicholls of UKHospitality urged parliament to take action before they break up for the summer next week. 

She said her members, made up of restaurants and hotels, were under increasing pressure as business rates relief and their contribution to staff furlough payments had begun to increase since the beginning of July. 

According to their figures, UK hospitality businesses took out a collective £6 billion in government backed loans including bounce back loans, had over £1.5 billion built up in tax arrears and other private debts and had incurred over £2 billion in rent arrears built up during the pandemic and subsequent lockdown. 

She said: “We’ve managed to keep bankruptcies and business failures to a relatively low level but I think we’ll see that picking up.”


Nightclubs in particular were keen to get clearer guidance on what their responsibilities will be for customer safety if they go ahead and reopen next week. 

Michael Kill of the Night Time Industries Association told the committee: “There is a lot of confusion. 

“The narrative seems to be that using the NHS Covid Pass will not be mandatory but if cases rise and the virus is not being controlled in certain spaces then they may well mandate it which could cause problems for our members.”

According to the latest guidance issued, “higher risk settings' ' such as nightclubs will be encouraged to use the pass as a condition of entry. 

While wearing face masks will no longer be mandatory the guidelines say they “expect and recommend that people wear face coverings in crowded areas such as public transport.”

They should also “meet outdoors where possible and let fresh air into homes and other enclosed spaces.” 

Businesses will be pressured to implement these measures by means of a legal duty on employers to manage risks for people affected by their business including the risk of Covid-19 infection. 

70% of nightclubs surveyed by NTIA said they didn’t plan to monitor customers’ vaccine status on entry although they would obviously consider doing more if the government mandated certification in certain venues. 

A Nightclub owner outlined the dilemma in testimony. He said: “We are looking at how to open as safely as possible. We could ask people to use the NHS app but our research shows that people don’t want to.

“If we do an event and 300 people then have to take 10 days out of their lives (isolating), having come into contact with someone with Covid and some then can’t work after that - are they going to come back?”


With the Covid-19 situation ongoing and rules being written then revised on a regular basis, businesses are desperate for some certainty and guidance. 

Sadly, the only certainty we can see at the moment is the closing window of opportunity for companies to take action to give themselves the best chance of surviving into the Autumn and beyond.  

The reintroduction of wrongful trading and winding up petitions at the end of September along with increasingly aggressive recovery action from lenders for outstanding bounce back loans means businesses only have ten weeks left to put their plans into action while the conditions are still relatively benign. 

As time ticks on, the rules and playing field are changing and soon it might be too late to act.

We offer a free, initial consultation for any business owner or director who wants to put their survival strategy to the test. 

Once we get a fuller picture of your individual situation, we’ll be able to advise on the best course of action you can take to restructure and rescue your business or explore alternative options that might be more beneficial in the long run. 

Charity borrowing
 
 
Whether they provide essential services to users, look after those that can’t look after themselves or even care for and protect the environment - all will have had their operations and funding disrupted by Covid-19 and the subsequent year of lockdowns
 
Another point the public often overlook is that charities have to function as businesses too in order to pay their staff, raise and invest funds and provide their services without interruption so the majority will have been dealing with the various negative financial repercussions of the pandemic too. 
 
This explains why charities were eligible to apply both for bounce back loans and lending from the Coronavirus Business Interruption Loan Scheme (CBILS) too. 
 
Charities applying for CBILS funding were given a special exemption to the otherwise essential application criteria with the rule that at least 50% of an applicant's income must come from trading being waived. 
 
Richard Sagar, policy manager at the Charity Finance Group, said that although it was welcome that this potential stumbling block was removed, there was a downside.  
 
He said: “There are still fundamental concerns that charities are being saddled with debt at a time of profound uncertainty about their future finances. 
 
“This could hamper their financial sustainability and ability to deliver public benefit when the country emerges from the Covid-19 emergency.”
 
Charities also had other sources of funding they could look for including grants and a loan scheme specifically aimed at charities and social enterprises called the Resilience and Recovery Loan Fund (RRLF).
 
The scheme lent out £24 million to 77 various recipients administered by Social Investment Business including Autism Plus, the Big Issue, Jo’s Cervical Cancer Trust and the Royal Society for Blind Children.
 
The majority of organisations who obtained RRLF funding were companies limited by guarantee (CLG) and the main three areas of focus benefiting from successful loans are charities working with financially excluded or people living in poverty; vulnerable young people and vulnerable older people including people with dementia.
 
Before the scheme wound up on March 31st 2021, it could lend between £100,000 and £1.5 million for a maximum term of five years. 
 
The first 12 months would be interest free and fee free. 
 
Additionally, the Foundation for Social Investment made nearly £4 million in grants available alongside loans if it was apparent that the funding would be unviable without an additional grant of between 20-40% of the approved loan amount. 
 
Nick Temple, chief executive of SIB said: “We have learned a great deal from the fund, and we will be using those insights in designing a successor loan fund, as well as building on the partnerships that have helped us achieve so much in the last 12 months. 
 
“This will mean continuing to support charities and social enterprises with patience, flexibility and responsiveness in the post Covid-19 recovery
 


If I close my business, can I still be chased for outstanding bounce back loans or CBILS debt?


 
Some charities and social enterprises required an even bigger helping hand to secure their services and had to make use of the two main borrowing schemes available for UK businesses - bounce back loans and the coronavirus business interruption loan scheme (CBILS). 
 
According to final figures provided by the British Business Bank, the total number of loans to “social work activities without accommodation” - the industrial classification covering charities - was less than most other sectors but the amount lent still totaled over half a billion pounds.
 
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The total number of loans granted was just over 13,000 and the average amount lent per individual loan is just over a quarter of a million pounds - £256,129.
 


 
Chris Horner, insolvency director with Business Rescue Expert, said: “A charity is just like any other business - especially if it can’t pay all of its bills when they come due. 
 
“But they are also unlike any other business because of their output, the services they provide and the unique place they occupy in society. 
 
“So in a lot of ways it’s always harder for them to function because their missions are so vital to many of their clients and service users that it can be easier to come up with reasons why loans and bills aren’t being repaid. 
 
“Sadly creditors rarely see things like that. They only see they haven’t been paid and for them reasons are simply excuses. 
 
From now until the end of September at the earliest, charities, social enterprises and community interest companies in financial difficulties have a vital window of opportunity to act to protect themselves and their services.
 
“They should begin by taking some professional advice about their situations and then consider their rescue and restructure options like administration or a CVA. These will allow a charity to keep operating while the debt is managed.
 
“If the situation is more serious and they can’t realistically make their debt repayments, including bounce back loans, CBILS or RRLF, then they should start to look at an efficient liquidation process like a creditors voluntary liquidation rather than prolong the inevitable.
 
“Whatever options they ultimately decide to pursue, they will have more room to maneuver if they make their decisions sooner rather than later.”
 


 
Charities are among the bedrocks that the rest of society is built on and helps function in certain key areas such as health, social care, leisure and many other aspects of our lives. 
 
Their unique social missions are always tempered by their structures and sometimes constrain or hinder them in their attempts to do more, often with less. 
 
2020 and 2021 is when this maxim met reality and sadly proved for many that in reality, you can only do less with less.  
 
But when it can feel like lives depends on you doing what you’ve always done, it can be easy to ignore those letters and emails, you’ll get round to them after you’ve finished doing the really important work you do every day. 
 
Unfortunately, creditors have rights and if a charity, social enterprise or community interest company can’t service its debts then it can be treated like any other insolvent business by them. 
 
If you’re worried about paying back your pandemic borrowing including bounce back loans or VAT arrears or how your charity can continue to make ends meet and keep providing your services then get in touch with us today
 
We offer a free, initial consultation where we can get a better understanding of your situation and work with you to reach a solution that will work to everybody’s benefit. 

HMRC

Specifically because the repayments from this and other Covid-19 support measures are coming due this year - if they haven’t already - and there is some confusion for businesses looking to close down about how seriously or not this outstanding debt is being treated. 

A recent example of the confusion is a letter that the Business Secretary Kwasi Kwarteng sent in a letter to business leaders this week. 

In the letter, he said that HMRC would take a “cautious approach” with companies that were trying to reopen post lockdown and pay down their debt appropriately. 

Specifically replying to concerns raised by R3, the insolvency trade body and the Institute of Directors that urged HMRC to help businesses in danger of becoming insolvent due to a combination of issues including:

Kwarteng wrote that HMRC would “adopt a cautious approach to enforcement of debt owed to government that will have accrued” and said that HMRC would soon update its enforcement methods so that any outstanding debt could be brought into managed arrangements for businesses affected by the pandemic and subsequent lockdowns. 

He said that using insolvency to enforce payment would remain a last resort and that he recognised that “the path back to full trading will be difficult for many companies, particularly those with accrued debt and low cash reserves.”


Does your business need to worry about bounce back loan fraud?


This is in contrast to news published by The Insolvency Service in the same week highlighting their success in petitioning courts to wind up five limited companies since this year that had been involved in fraudulent activity involving bounce back loans and CBILS borrowing. 

Dave Elliott, Chief Investigator at the Insolvency Service said: “The bounce back loan scheme was made available to help support businesses during the pandemic. 

“It’s outrageous that some directors have been trying to abuse this support, and the action we have taken shows we take this issue extremely seriously.”

The new Ratings (Coronavirus) and Directors Disqualification (Dissolved Companies) Bill, currently before Parliament, will give the Insolvency Service additional powers to investigate and disqualify directors of companies which fraudulently claimed bounce back loans but were then subsequently dissolved. 

The investigative power will be retrospective to look at conduct that took place before the law came into place and if wrongdoing or malpractice is found, the sanctions can include a ban of up to 15 years or even criminal prosecution for serious offences uncovered. 

Chris Horner, Insolvency Director with Business Rescue Expert, thinks that while it’s useful for HMRC and the Insolvency Service to remind directors and business owners about their responsibilities, the mixed messaging might cause unnecessary confusion.

He said: “From the conversations we’ve been having within the industry and examples we’ve seen it’s apparent that the Insolvency Service are directly targeting abuse of the bounce back loan scheme, CBILS and furlough fraud as their highest priority this summer.  

“They will specifically be looking at businesses with bounce back loans who have tried to use the route of dissolution or striking off to close their business down instead of using a more appropriate liquidation procedure

“In these circumstances it wouldn’t be surprising to see them seeking compensation orders to make directors personally liable for these debts if they have closed their business incorrectly in the eyes of the Insolvency Service. 

“Recovery action on defaulted payments will be pursued for at least 12 months as standard and even though lenders will be repaid under government guarantee for bounce back loans for example, they are still required to continue any recovery action. 

“They will probably avoid initiating insolvency proceedings just for bounce back loan debt by itself but will continue with debt collection measures including using debt collectors or bailiffs. 

“We can also clarify that any personal guarantees given against bounce back loan debt specifically are unenforceable and these debts cannot be sold on to other collectors. They will remain the responsibility of the original lender to collect. 

“Another thing bounce back loan borrowers need to remember is that even if they have obtained a payment holiday from their first repayments, interest continues to accrue during the payment holiday.  

“If a business with bounce back loan borrowing is contemplating liquidation, which it can do, it will be treated like any other creditor and should not be paid over and above agreed repayment terms. 

“This also includes if the funds are being held as cash in their bank account. They should not use this to repay the lender ahead of other creditors as in the event of insolvency it would be treated as a preferential payment.”

If your business has taken out a bounce back loan or CBILS borrowing in the past 18 months and you’re worried about repayments or if you think your best option is to close your company but don’t know how to deal with these specific debts then get in touch with us today.

We offer a free initial consultation for business owners and directors to discuss their situation and we’ll work with them to come up with the most efficient and effective plan to reach their goals. 

As it continues to be a challenging environment for companies and will remain so for the rest of the year and possibly beyond, so taking the time to fix any financial difficulties facing your business right now could be the best time investment you make in 2021.   

Travel agents, tour operators, suppliers, local partners are joining with airlines and airports to get the spotlight on them and hopefully some industry-wide support too. 

This follows from new research released by ABTA - the trade association for travel agents and tour operators in the UK - that reveals over half of independent travel agents fear they will be out of business within three months, putting thousands of jobs at risk. 

57% of small and medium sized travel agents surveyed said they believed they wouldn’t have enough cash to survive if current trading conditions and government support continues or worsens. 

This could mean that up to 195,000 of the 526,000 jobs (37%) the industry provides could be in jeopardy if there is no material change of circumstances.

Mark Tanzer, chief executive of ABTA said: “Travel businesses feel completely abandoned by the government, which has consistently failed to provide adequate support for an industry which has borne the brunt of the economic fallout from the pandemic. 

“People have worked tirelessly through the pandemic trying to stay afloat, taking on extra jobs, having to make long-standing, valued staff redundant, worrying about mounting debts. 

“While we can clearly see the financial toll with jobs and businesses lost, the emotional toll of this ongoing battle, which still has no discernible end in sight, cannot be underestimated. 

“Unless the government’s strategic review of international travel on 28th June brings forth a sensible plan for travel to reopen for the summer and targeted support that recognises the catastrophic economic hit that the sector has taken, the industry will truly begin to buckle before the summer is over.

ABTA are demanding that the government provides a tailored package of financial support to see the industry through to a recovery phrase including:

They would like to see any measures brought in immediately to counter the rise in employer furlough contributions at the end of the month and business rates relief tapering beginning.

Since February 2020, revenues for travel agents and tour operators has been consistently down between 86-90% every month. 

Travel businesses have also had no sector-specific support from the government to date and have had limited access to the more general grant support measures that were available. 

Retail travel agents were only deemed eligible for the minimum restart grants and tour operators were excluded from the process entirely. 

ABTA found that less than half of travel companies were able to use the furlough scheme as staff were needed for non-revenue raising activities, such as issuing refunds and managing holiday rebookings. 

While travel businesses will benefit from the extension of protections recently announced including the ongoing suspension of the use of winding up petitions by creditors and evictions by commercial landlords, they will still have to begin to make a 10% contribution to wages of furloughed staff from July 1st along with paying a third of business rates due.

This doesn’t take into account repaying any bounce back loans or CBILS borrowing directors or business owners have had to make use that are now coming due. 

With international travel still largely restricted for the second summer season in a row, ABTA thinks that travel businesses will not have the money to cover their costs the longer the restrictions go on. 

Health Secretary Matt Hancock reiterated that the Government believes they are on track for a general easing of restrictions in the UK on July 19th but warned that it is more difficult freeing up international travel.


One of the most important factors to running a successful business is certainty. 

If you can predict or rely on a level of demand then you can plan and fund your own expenditure accordingly but the past 18 months have blown this calculation up for a lot of industries - especially the travel sector. 

There is still no guidance on international travel availability or demand as we approach the peak holiday season meaning that if August arrives with no material change then many travel agents and tour operators will be looking at the second bleak midwinter in succession. 

So while everyone is hoping that the unrestricted travel will return within the next couple of months and #traveldayofaction succeeds, the chances are that this might still not be enough to return many travel businesses to profitability, at least before the furlough scheme ends in September and other measures are also lifted. 


If you feel your business is stuck on the runway and instead of going places, you’re working out how to pay the bills - get in touch with us.

We offer business owners and directors from any industry - not just travel - a free initial consultation to discuss their unique situation and what options they might have to change course. 

The sooner you get in touch, the better as you’ll generally have more options than you think. 

No matter what future plans you have, chances are you’ll eventually reach a better destination after you speak to one of our expert advisors than if you don’t. 

parliament

The government announced that current restrictions on statutory demands and winding up petitions will remain in place for a further three months to protect companies from creditor enforcement action where their debts relate to the pandemic. 

The last sentence here is crucial - “where their debts relate to the pandemic”.  

There could easily be test cases being brought where creditors argue that the pandemic was immaterial in the case, especially if debts were incurred before March 2020 when the first lockdowns were implemented.

In addition to the ongoing ban on actions, larger suppliers are still unable to cease supplies or ask for additional payments from customers that are undergoing a business rescue process, although small suppliers don’t have to continue to supply companies in insolvency. 

Also if a business has been subject to an insolvency procedure in the previous 12 months such as administration or a company voluntary administration (CVA), they will be able to enter an insolvency moratorium with relaxed criteria until the September 30th expiry date. 

Lord Callanan, Minister for Corporate Responsibility, said: “We’re extending these important measures to give businesses the extra breathing space they need as we cautiously reopen the economy. 

“With the threat of aggressive creditor action and insolvency eased, companies will be able to focus all their efforts on their recovery.”


Why a CVA might be your company’s best defence this Summer


Reaction from retail landlords is understandably negative to the extension of the rent & eviction moratorium until the end of March 2022 pointing out that retailers can pay bonuses and dividends to shareholders, and while they have to start paying business rates again from July, rent can be waived for a further nine months.

By the time it’s due to end the commercial rent moratorium will have been in place for two whole years.  

The British Property Federation argues that local authorities will also suffer if unscrupulous businesses exploit the moratoriums and pay no rent. 

They estimate that since the restricted measures were brought in, property owners had collectively lost £6 billion in revenue or £1 in every £6 of rent due. 

A spokesperson for R3 said: “Many companies across the country will appreciate the action the Government has taken - particularly given the delay to the easing of lockdown announced last week.

“While the extension of these measures will benefit many companies, as time goes on the Government will need to consider the impact on creditors - who have staff and overheads to pay themselves. 

“The decision gives directors and business owners a further and possibly final window to plan how they will take their business forward when these temporary measures end. 

“We urge them to use this time to seek advice from a qualified professional and to do so as early as possible, so they can benefit from the broadest range of options available and have a greater time period to decide how they will move forward.”

We couldn’t agree more. 

Businesses with financial challenges have yet another opportunity to decide what direction they want their company to go in and make concrete decisions right now to give themselves a fighting chance of making it happen. 

You could forgive cynical directors who might want to muddle through thinking: “well, this is the fifth last chance so why not wait until the next one?” 

Probably because this new deadline coincides with the formal end of the CJRS furlough scheme which would be harder to extend. It will also see thousands of bounce back loans and CBILS borrowers first repayments come due after the first deferral period from earlier this year has ended. 

Also three months time will see many thousands more citizens vaccinated and the end of the summer holiday season too. 

If you want to improve the odds of your business being around in three, six or a hundred month’s time - get in touch with us today to arrange a free initial consultation. 

Then you can really concentrate on pursuing your plans, not frantically consulting the calendar every few weeks for the latest latest deadline. 

May 2021 insolvency stats
 
The number of corporate insolvencies across the UK has also risen slightly in the latest official monthly company insolvency statistics released by The Insolvency Service
 
For England and Wales, the total number of corporate insolvencies for May was 1,011.
 
This is an 8.8% rise on the 925 recorded in April and is 7% higher than the 946 recorded in May last year but still 25% down on the 1,352 recorded in May 2019.   
 
There’s a sense of Deja Vu about this set of statistics. 
 
Back in December, we saw a rise in insolvencies that also accompanied a rise in general spending just before the Christmas season (although not as much as a traditional one).
 
We then had another third lockdown and by January the number of insolvencies had collapsed again. 
 
So right now we are seeing increased consumer spending at exactly the same time that lockdown restrictions are being extended for at least the next four weeks which would indicate that it would be surprising to see figures increase next month.
 
The caveat to this is that while the lockdown is continuing, support measures are not. 
 
The temporary ban on creditor actions such as  statutory demands and winding-up petitions is being lifted at the end of June along with a halt on commercial evictions by landlords and employers will also be paying more towards staff furloughs before the CJRS finally winds up in September. 
 
All of which means that the trending direction of next month’s figures will be as intriguing as the numbers themselves.
 
The 1,011 company insolvencies in England and Wales consisted of 930 creditor voluntary liquidations (CVLs), 31 compulsory liquidations, 43 administrations and 6 company voluntary arrangements (CVAs). 
 
In comparison to the data for the same month from the previous two years, we see how depressed the numbers are right now. 
 

 
Additionally, there were 51 company insolvencies in Scotland (made up of 8 compulsory liquidations, 37 CVLs, 5 administrations and one CVA) which was 46% higher year on year but 35% lower than in May 2019. 
 
Interestingly, Scottish company insolvencies tended to be led by compulsory liquidations but since the beginning of lockdown in March 2020, company voluntary liquidations have been the highest type of insolvency procedure in 12 out of the 14 subsequent months. 
 
There were also 7 company insolvencies registered in Northern Ireland (made up of one compulsory liquidation and 6 CVLs). This is a rise of two from last month and while 40% higher than May 2020, is 83% lower than the same period two years ago. As a note of caution, when dealing with such relatively low totals, any changes produce high percentage changes rather than being statistically significant in themselves.
 
The overall UK total of company insolvencies for May 2021 is 1,069, an overall increase of 101 from last month’s collective total. 
 


 
“Support has held off rather than halted the economic damage”
 
Duncan Swift, Immediate Past President of R3, the insolvency and restructuring trade body said: “Today’s increase in corporate insolvencies has been driven by a rise in creditors voluntary liquidations, while administrations have fallen to their lowest number since the start of the pandemic. 
 
“While it’s too early to say whether the mild increase in corporate insolvency numbers is the start of something bigger, times remain tough for businesses in the UK. 
 
“Government support has held off rather than halted the economic damage of the pandemic, preventing a serious rise in insolvency levels, but many business owners are now having to look ahead to how they’ll cope when these measures are withdrawn in the weeks and months ahead. 
 
“Business owners will be feeling increasing concern at the prospect of another delay to the easing of the lockdown in England and although the economy continues to grow, there’s still a lot of ground to make up to fully recover from the unprecedented economic contraction in April 2021. 
 
“Consumer spending has increased but it’s still below 2019 levels and while consumer confidence is improving, people are still worried about the future of the economy.”
 
From investment fund AI algorithms all the way to Mystic Meg, predicting the future is an uncertain science, especially when the variables keep changing. 
 
Restaurants, pubs, bars and other hospitality businesses who gambled on reopening at the end of the month will already be feeling the effects of the wrong call - even though it’s through no fault of their own. 
 
Most other business owners will understandably be nervous about what the next few weeks will hold because all restrictions were absolutely, positively going to be lifted on June 21st until suddenly they weren’t.   
 
With bounce back loans coming due and other support measures ending in a matter of days, getting professional advice on what options are available for directors and business owners should be one of the top priorities in the time remaining. 
 
We offer a free initial consultation where we can learn about what your immediate challenges are and provide you with effective and efficient options you can implement - right now - to help you revive, rescue or begin to restructure your business so you’ll be in the best position when restrictions end for everyone - whenever that is. 

Waterloo, Cold Harbor, Belleau Wood, D-Day and Midway were all fought in this month and businesses would be sensible to prepare to defend themselves on multiple fronts by the end of it. 

Temporary restrictions on the issuing of winding up petitions and statutory demands are due to be lifted on Wednesday 30th June.

The last day is also the second “Quarter Day” of the year when many commercial tenants rents are due, making it the last rent day which is covered by another temporary ban, this one on the eviction of commercial tenants by their landlords, which is also due to lapse that day meaning that bailiffs will be able to start making calls and visits to delinquent businesses.  

Many companies will have built up debts over the pandemic and lockdown periods for understandable and necessary reasons. 

They may also have taken out bounce back loans or CBILS loans to make sure they could meet essential outgoings and the repayments on these agreements will also be beginning, in the latter case, at higher interest rates than the 2.5% fixed rate of the bounce back loan. 

A spokesperson for R3, the trade body for the Insolvency and business recovery sector, said: “A little cooperation (between creditors and companies) will go a long way towards securing longer-term repayments. 

“Aggressive actions to recover debt, while shortly to be allowed once more, would go against the spirit of everything that the Government has done to keep many businesses afloat, and to protect the jobs that they support. 

“We would hope creditors will realise that compromise and reasonableness are a better route forward. After coming through so much, it would be a terrible waste to see firms unnecessarily falling by the wayside.

“Many commercial landlords have taken a pragmatic view of their tenants’ positions by recognising the unique situation that was evolving, and agreeing to defer - although crucially not cancel - rent payments. 

“However, these landlords have still had their own responsibilities to meet over the last year and a half, including mortgages, insurances, maintenance costs and utility bills, and they will be understandably eager to recover the money they’re owed. 

“If a debtor fails to repay then creditors are perfectly within their rights to take enforcement actions, even if difficult trading conditions means that there’s no way they can repay along pre-pandemic timelines. 

“The clear concern now is that too swift a return to these businesses having to meet their full cost liabilities in an economy that’s not yet fully functional will be enough to push many of them under.”


Bounce back loans - how much has been borrowed where you live?


Business Rescue Expert Insolvency Director Chris Horner agrees and said: “Some landlords and creditors will be itching to begin recovery action the moment they’re allowed to, so it would be prudent and sensible for businesses to reach out and have conversations with them right now, if they haven’t already begun to communicate.

“While some might insist on trying to enforce unrealistic agreements based on pre-Covid calculations, the majority may well be amenable to making sensible changes to arrangements.”

There are several options a company can pursue if creditors demand their due before June 30th and are intent on following through on their threats. 

A smart business owner could employ an insolvency moratorium before then which would halt any subsequent creditor or recovery actions for a further 20 working days while the company explores what options are available to it. 

One of these options for otherwise viable businesses that has built up a high debt burden over the past 18 months is a company voluntary arrangement or CVA. 

To continue with the military metaphors for a moment, placing your business into a CVA is the equivalent of strategically withdrawing into a heavily defended and impregnable fortress. 

Amongst other advantages, a CVA halts all winding up petitions issued against a business and any impending bailiff visits straight away. 

An agreement with creditors is negotiated to cancel a proportion of outstanding debts, which could include bounce back loans or CBILS loans, in exchange for regular monthly payments, usually over 60 months, to clear the remaining balances. 

After this, the business can emerge from behind these defences, debt free, and ready to re-engage on far more favourable terms. 

June 30th might seem a long way off but It’s less than three weeks. 

This might be the day that your creditors have been marking down on their calendar for months so don’t assume that their better nature will automatically kick in as the day itself dawns. 

R3 rightly points out that aggressive recovery action may go against the spirit of the times but while the letter of the law enjoys legal standing, the spirit has no such protections. 

Relying on the better angels of people’s nature is not a strategy we’d ever advise but if you arrange a free initial consultation with us at your most convenient time, we’ll happily let you know what we would recommend in your situation.

We will explore all available options with you, including several you might not have considered, and work with you to implement the most efficient and effective strategy to make sure your company can make the rest of 2021 memorable for the right reasons. 

Business Rescue Expert is part of Robson Scott Associates Limited, a limited company registered in England and Wales No. 05331812, a leading independent insolvency practice, specialising in business rescue advice. The company holds professional indemnity insurance and complies with the EU Services Directive. Christopher Horner (IP no 16150) is licenced by the Insolvency Practitioners Association

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