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Sole trader and cannot afford Bounce Back Loan repayments

Sharon McDougall - Updated - 2nd August 2023 - 2 minutes to read

Personal debt help for Sole Traders with outstanding Bounce Back Loans

The Bounce Back Loan Scheme (BBLS) offered emergency funding for companies and sole traders at the height of the coronavirus pandemic, and was instrumental in keeping many small businesses afloat.

With so many sole traders still experiencing financial distress, however, what happens if you cannot afford your Bounce Back Loan repayments? Are you personally liable for the outstanding amount?

How do Bounce Back Loan repayments work?

In acknowledgement of the continuing difficulties businesses are facing due to Covid-19, the Chancellor amended BBLS to allow an additional four years in which to repay. Other options under the Pay As You Grow initiative enabled borrowers to take a six-month payment holiday, and/or make interest-only payments for six months.

The government guarantee doesn’t apply to borrowing businesses and sole traders, however. It’s only applicable to the lender, who must chase payment of the outstanding amounts before they can trigger the guarantee.

What does this mean for sole traders who cannot repay their Bounce Back Loan?

Your lender is likely to demand full repayment of the loan. As you’re a sole trader without the protection of incorporation your business debts are your debts, and you can be pursued through the courts on a personal level.

This could mean your lender petitions for your sequestration (bankruptcy) if you cannot afford to repay. The rules of the Bounce Back Loan Scheme do provide protection for your home and primary personal vehicle, however.

Consider a formal debt procedure

Scotland operates several supportive debt procedures, which may allow you to continue trading whilst paying back some or all of your debts at an affordable rate. Initially, you’d have to seek guidance from an approved money adviser or licensed insolvency practitioner (IP), to ensure that you take the most appropriate route.

Debt Arrangement Scheme (DAS)

The Debt Arrangement Scheme, or DAS, is one such insolvency procedure that’s backed by the Scottish government. As additional interest and charges are frozen, your debts become a little more manageable.

Scottish Trust Deed

Scottish Trust Deeds provide an extended period in which to repay a proportion of your debts, and as the Bounce Back Loan is an unsecured debt this may be a suitable option. Trust Deeds typically last for four years, and any remaining amount owing on the Bounce Back Loan or other debts can be written off.


If, on the other hand, there’s no possibility of your business continuing, sequestration may be your only choice. This involves appointing a Trustee who sells any assets you hold, and repays your creditors as far as possible. In a similar way to the Scottish Trust Deed, once you’ve been discharged from bankruptcy any unpaid proportion of your Bounce Back Loan is written off.

Seeking professional help is key for sole traders

As a sole trader you’re more exposed to the risk of personal liability for debts incurred by your business. Limited company directors receive some protection in this respect, as their business is a separate legal entity.

It’s vital to obtain professional advice as early as possible if you cannot afford your Bounce Back Loan or any other repayments, as debt can quickly increase when additional charges and interest are applied.

If you’re a sole trader and are struggling to repay your Bounce Back Loan, Scotland Debt Solutions can help. We specialise in helping Scottish residents to escape debt, and can offer you a free, same-day meeting at one of our network of offices around Scotland.

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Sharon McDougall


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