During R3’s webinar titled ‘Bounce Back Loans - An Essential Guide for the Insolvency Profession’, a number of questions were submitted by attendees for consideration by the British Business Bank, UK Finance and The Insolvency Service. These FAQs published by R3 seek to answer those questions to aid the insolvency profession when advising clients who took advantage of a Bounce Back Loan (BBL).
The Bounce Back Loans Scheme (BBLS) was designed to enable UK businesses to access finance quickly during the coronavirus (COVID-19) pandemic. More than 1.5 million businesses that were losing revenue and seeing their cashflow disrupted as a result of the coronavirus outbreak took out a BBLS facility before the scheme closed to new applications on 31 March 2021.
The BBLS guarantee is in place between the lender and the British Business Bank (BBB). Whether a lender is able to claim or not under the guarantee is a contractual issue between the lender and the BBB and does not impact on the lender’s rights as a creditor in an insolvency process. The borrower contracts with the lender for the loan and their obligations to pay the loan are to the lender. Lenders are obliged in most circumstances to follow their normal recoveries policy in relation to BBLS. It is not the case that lenders on a default can rely solely on the guarantee, and where a claim is made under the guarantee, the lender must account to the BBB for any proceeds recovered from the borrower. Therefore, in an insolvency process, subject to (i) the restrictions on taking/enforcing security highlighted in this Q&A and (ii) the recoveries waterfall, the Insolvency Practitioner (IP) should treat the lender as it would any other lender of non-BBLS debt.
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