Worcestershire businesses warn of Covid loan ‘mountain of debt’
BILLIONS of pounds in loans to help small and medium-sized businesses survive the coronavirus pandemic is a “mountain of debt” that businesses should start paying off as soon as possible.
That’s the message from business and commercial lawyer Clare Lang, who encourages businesses to use the lifting of Covid restrictions and the growth in commerce that accompanies it as a window of opportunity to reduce their liabilities.
Ms Lang, a partner at Worcestershire law firm mfg Solicitors, said the loans would be considered by future liquidators, while directors could find themselves personally liable if their companies were unable to pay.
She urges all directors who may not be able to repay their loans to seek legal advice on their options.
Almost 1.6 million Bounce Back loans worth a total of Â£ 47 billion have been approved and accounted for the largest part of the more than Â£ 80 billion of total government guaranteed loans during the pandemic.
Ms Lang said: âThe Bounce Back loans were a vital emergency lifeline for many businesses that were unable to do business normally during the coronavirus restrictions.
âBut it’s not free money and the debt will have to be paid off.
“Now is the time to act to reduce the mountain of debt, as restrictions have been lifted and most businesses are able to conduct business normally.”
One of the perks of the loans was that administrators weren’t asked to provide personal collateral, but Ms. Lang warned that didn’t mean they couldn’t be held accountable.
She added: âIf the loan cannot be repaid, the company may be insolvent, the responsibility rests with the creditors and not the shareholders.
“If the company cannot repay the loan, a liquidator can examine where the loan was spent and the directors can be held personally liable if the funds were spent to repay other debts, as this would be considered to be debt. company money.
âThe important thing for any administrator to do if they cannot start repaying these loans is to make sure they are upfront and transparent with the insolvency department and the lenders.
âIt wasn’t free money. It was never meant to just keep businesses going during the lockdown.
“These debts have to start paying off or they will become the same as any other bad debt – the directors being held accountable.”
The Insolvency Department has taken action against companies that abuse financial support, including disqualifying a director for 12 years.