Bounce Back Loan options for directors: a step-by-step guide

Step 1: where your loan stands now

The scheme lent from May 2020 and closed to new applications and top-ups on 31 March 2021 (British Business Bank). Each loan was a six-year term loan from £2,000 up to 25% of turnover, capped at £50,000, at a 2.5% fixed rate the government set, with no fees allowed. The government paid the interest for the first 12 months and nothing was repayable in that year (BBB FAQ).

That timing matters now. Working from those dates (our arithmetic, not a published figure), a loan that kept its original six-year term ends somewhere between May 2026 and spring 2027, so many are in their last months. A loan extended to ten years under Pay As You Grow runs to roughly 2030 or 2031. Before deciding anything, get three things from the lender in writing: the current balance, the end date, and any Pay As You Grow options already used on the account. Interest-only periods and the repayment holiday are limited in number, so it matters which you have already had.

Step 2: is the company solvent?

This decides everything else. A solvent company chooses how to repay. An insolvent one, meaning it cannot pay its debts as they fall due or its liabilities exceed its assets, has to think about all its creditors together, and you as a director take on duties to them. Paying one creditor ahead of the rest can later be reversed as a preference if the company wanted to put that creditor in a better position (IA 1986 s239), and a director who carries on taking credit once there is no reasonable prospect of avoiding insolvent liquidation can be ordered to contribute personally (IA 1986 s214). Our preference question page explains how that applies to a Bounce Back Loan.

If you are not sure, run the insolvency test and the cash flow runway calculator before you speak to the lender. The answer tells you which half of the table below applies.

Step 3: the routes, side by side

The first three rows are for a company that can pay its debts. The last four are for one that cannot, or soon will not. Directors often reach for a solvent-company fix, like refinancing or Pay As You Grow, when the company is already insolvent. That only delays the harder decision, and it can make your own position worse.

Pay As You Grow, with a worked example

Pay As You Grow was first announced by the Chancellor in September 2020, and when the details were set out on 8 February 2021 the government said lenders were expected to offer it to every Bounce Back Loan borrower (gov.uk). There are three options, which the British Business Bank says can be used on their own or together (British Business Bank):

• Extend the term from six years to ten, at the same fixed 2.5%.
• Pay interest only for six months. Available up to three times during the loan.
• Take a repayment holiday of up to six months, once. The loan gets longer by the length of the holiday.

The British Business Bank says using Pay As You Grow does not affect the borrower's credit rating, but that it may affect how lenders assess creditworthiness later, because any new lender will count the outstanding balance and its repayments. The government also pointed out that FCA conduct rules require lenders to show forbearance to borrowers in difficulty (gov.uk).

What the options cost

This is our own calculation, not the lender's schedule. It uses the scheme's fixed 2.5% and a standard repayment formula, and assumes the change was agreed before the first repayment. That means 60 monthly repayments on a six-year loan and 108 on a ten-year one, because the first year was repayment-free. Your lender's figures may differ slightly, especially if you change the term partway through.

On these assumptions the ten-year term cuts the monthly payment by about 42% and nearly doubles the total interest. The British Business Bank's own example goes further: extend to ten years and pay interest only for 18 months in a row. That lowers the payments for a year and a half, but during that time nothing comes off what you borrowed.

Pay As You Grow is a cash flow tool for a company that will be able to pay. If the only way the numbers work is by stretching every debt as far as it will go, test solvency first (Step 2).

Repaying early or refinancing

A solvent company can repay the whole balance at any stage, and lenders cannot charge early repayment fees (BBB FAQ). If the company has the cash and nothing else is under pressure, that is the cleanest exit.

Refinancing is different, and it pays to be careful. The British Business Bank says a Bounce Back Loan cannot be transferred to a new bank or lender: it has to be repaid or kept with the original lender. So "refinancing" means taking new borrowing to clear it. The Bounce Back Loan came with no personal guarantee, because the scheme did not allow one. New commercial lending is not under those rules, and small company lenders often ask directors for a personal guarantee (that is general market practice, not a scheme rule). Before you sign, check whether you would be swapping a debt that cannot reach you personally for one that can. Our personal guarantees page explains what one exposes you to.

If the company is already insolvent, new borrowing to clear an old loan does not fix anything. It pays one creditor in full with money from another while the rest wait, and it raises questions about whether you took on credit you had no reasonable prospect of repaying. We do not arrange or recommend borrowing. If you are weighing it up, speak to a Licensed Insolvency Practitioner first.

Arrears, formal demands and settling

If the company has fallen behind, talk to the lender before it escalates. gov.uk's guidance says that a borrower who has defaulted and received a formal demand should contact the lender, and may be able to enter a repayment plan. It also points to Business Debtline, a free debt advice charity for small businesses, on 0800 197 6026 (gov.uk).

Lenders do go to court. Between 1 April 2022 and 31 May 2023, Insolvency Service figures record 116 compulsory winding-up orders made on petitions presented by one scheme lender, Barclays Bank, in Bounce Back Loan cases (Insolvency Service). If a statutory demand or a petition has already arrived, go to the first 48 hours now.

Settling for less. We found no published scheme rule that gives a company the right to settle a Bounce Back Loan at a discount. The government's Voluntary Repayment Scheme, open until 31 December 2025, was for borrowers coming forward to repay loans they should not have had, and it gave no protection from investigation (gov.uk). It has now closed, although gov.uk says a lender can still be contacted at any time to repay. Any reduced settlement outside a formal procedure is for the lender to decide. If the company is insolvent, a private deal with one lender also has to be fair to the other creditors. The statutory way to make a Bounce Back Loan lender accept less is a CVA, below.

When the company is insolvent

In every formal procedure, a Bounce Back Loan that was properly obtained and spent on the business is just an unsecured debt. The lender claims alongside the other unsecured creditors and then relies on its government guarantee for what it does not recover. The scheme guaranteed 100% of the balance to the lender, capital and interest (British Business Bank).

• CVA: the company keeps trading and pays creditors what it can afford over time. The lender votes as an unsecured creditor. The proposal passes with 75% or more by value of those responding, unless more than half of the unconnected creditors by value vote against (IR 2016 r15.34(3), (4)). Once it passes, it binds every creditor who was entitled to vote (IA 1986 s5(2)).
• Administration: an administrator takes control to rescue the business or get a better result than liquidation. The loan is dealt with like other unsecured debt.
• Creditors' voluntary liquidation: the company closes and its assets are sold. After preferential debts, what is left is shared among unsecured creditors in proportion (IA 1986 s107). Whatever the lender does not recover does not become your debt, unless there was misuse.
• Compulsory liquidation: the same end result, but a creditor starts it by petition and the official receiver usually takes control first.

In a liquidation or administration of an insolvent company, the office-holder must send the Insolvency Service a report on each director's conduct within 3 months (CDDA 1986 s7A), and how the loan was spent is one of the things they will look at. Records showing the money went on wages, rent, stock and suppliers are your best protection. The liquidation cost calculator and the creditor dividend estimator show what a CVL might cost and what unsecured creditors might receive.

Step 4: check your personal position

Lenders were not permitted to require personal guarantees under the scheme (BBB FAQ), and the borrower was the company. For a limited company, then, an unpaid Bounce Back Loan does not become your debt just because the business failed. Misuse is what changes that. These are the kinds of misuse gov.uk and the Insolvency Service list:

The consequences are set in law. A court must disqualify a director whose conduct makes them unfit, and the ban runs for at least 2 years and at most 15 (CDDA 1986 s6(4)). Since the Rating (Coronavirus) and Directors Disqualification (Dissolved Companies) Act 2021, that also covers directors of companies dissolved without an insolvency (2021 Act s2). The Insolvency Service has 3 years from the date of insolvency or dissolution to apply, or longer with the court's permission (CDDA 1986 s7(2)). A disqualified director can also be ordered to compensate creditors who lost money because of that conduct (CDDA 1986 s15A).

This is not a remote risk. In 2025/26 the Insolvency Service obtained 1,044 disqualifications for unfit conduct under section 6. In 773 of them, at least one allegation related to abuse of COVID-19 support schemes, and those bans averaged 9.4 years (Insolvency Service enforcement outcomes 2025-26, Table 2). That figure covers all COVID-19 support schemes, not only Bounce Back Loans.

If part of the loan went somewhere it should not have, say so to your insolvency practitioner at the start. It is far better dealt with openly and early than found by a liquidator later. See director disqualification and am I personally liable for company debts? for the wider picture.

Sole traders and partnerships are different: there the borrower is you. Under the scheme, recovery action cannot be taken over your main home or main personal vehicle (BBB FAQ), but other assets are not protected in the same way. This guide is written for limited companies.

Step 5: what to do this week

1. Get the facts from the lender in writing: the balance, the end date, and any Pay As You Grow options already used.
2. Pull together the spending records for the loan: bank statements from the month it landed, and what each large payment was for. Do this now, whatever route you take.
3. Test solvency with the insolvency test, and list every creditor with the creditor list template.
4. Hold a board meeting and minute it. Record the position and the route you chose, and why. Use the board minutes template or the board advice record.
5. If the company is solvent: ask the lender in writing about Pay As You Grow or early repayment. Before signing any refinance, check whether it carries a personal guarantee.
6. If it is insolvent, or you are unsure: speak to a Licensed Insolvency Practitioner before paying off any one creditor, taking new credit or filing to strike off. You can check a practitioner is licensed on gov.uk's find an insolvency practitioner service.
7. If a statutory demand or petition has arrived, go straight to the first 48 hours.

Methodology and sources

The scheme terms and Pay As You Grow options come from the British Business Bank's Bounce Back Loan Scheme pages: the scheme overview, options for paying back and the small business FAQs, all read on 24 September 2026. The formal demand and Voluntary Repayment Scheme points come from gov.uk's scheme guide, and the misuse list from that guide and the Insolvency Service's fact sheet. Enforcement figures are the Insolvency Service's own management information: the ad hoc Bounce Back Loan statistics published July 2023 and enforcement outcomes 2025-26. The Insolvency Service says the ad hoc figures are estimates that may not include every case, and that the enforcement outcomes tables come from live administrative systems and may be revised. Statutory rules were read on legislation.gov.uk the same day. The repayment tables are our own calculation from the scheme's fixed 2.5% rate using a standard repayment formula. They are not a lender quotation. The loan end dates in Step 1 are our arithmetic from the scheme dates and the six-year term. The point about personal guarantees on replacement finance describes common market practice, not a scheme rule. We found no published figure for how often lenders agree discounted settlements, so we do not give one. This guide covers limited companies in England and Wales. It is general information, not legal, financial or insolvency advice.

Bounce Back Loan options: common questions

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