Am I Personally Liable for a Bounce Back Loan?

The UK government introduced the Bounce Back Loan Scheme (BBLS) in response to the economic challenges posed by the COVID-19 pandemic. This scheme aimed to provide financial support to small businesses by offering them easy access to loans. While BBLS was a lifeline for many businesses, it also raised questions about personal liability. This article will explore the factors determining whether am I personally liable for a bounce-back loanand clarify this important financial matter.

Understanding the Bounce Back Loan Scheme (BBLS)

The BBLS was designed to provide financial relief to small and medium-sized enterprises (SMEs) affected by the pandemic. It offered loans ranging from £2,000 to a maximum of £50,000 or up to 25% of a business’s turnover, with the government acting as a guarantor. The scheme featured several favourable terms, such as a fixed interest rate of 2.5% and a repayment holiday for the first year.

Limited Liability Nature of BBLS

One of the key aspects of the BBLS is that it is a business loan, not a personal loan. This means that, in most cases, the liability for repaying the loan rests with the business entity itself rather than the individual owners or directors. Here are the factors that contribute to this limited liability:

Legal Structure of the Business

The legal structure of the business plays a pivotal role in determining liability. If your business is registered as a limited company or a limited liability partnership (LLP), the liability typically remains with the business entity. In such cases, the personal assets of directors or shareholders are usually protected.

Personal Guarantees

While BBLS loans do not require personal guarantees or collateral, some lenders may ask for them, especially for larger loan amounts. If a personal guarantee is provided, the individual is personally liable for repaying the loan if the business defaults.

Fraudulent Activity

Individuals involved in such activities may become personally liable for the loan if a business obtains a Bounce Back Loan through fraudulent means or provides false information.

Sole Traders and Partnerships: Personal Liability Considerations

The lines between business and personal liability can be less distinct for sole traders and partnerships. Individuals may be personally liable for the Bounce Back Loan in such cases. Here’s how it works for different business structures:

Sole Traders: As a sole trader, you and your business are legally considered a single entity. This means that any loans, including BBLS loans, taken by the business are ultimately your personal responsibility.

Partnerships: In a general partnership, all partners are jointly and individually liable for the debts of the business. This includes Bounce Back Loans. Limited liability partnerships (LLPs) offer some protection, but partners may still be personally liable if they provide personal guarantees.

Defaulting on a Bounce Back Loan: Consequences

It’s important to understand the consequences of defaulting on a Bounce Back Loan, as they can vary based on your business structure and whether personal guarantees were involved. 

  • Defaulting on a bounce-back loan can negatively affect your credit score, making it more challenging to secure financing in the future.
  • Lenders may take legal actions to recover the debt, including pursuing court orders to seize assets or freeze bank accounts.
  • In cases where personal guarantees were provided or for sole traders and some partnerships, personal liability may come into play, potentially risking personal assets.
  • For limited companies, directors are generally protected from personal liability. However, if a director is found to have engaged in fraudulent activity, they may face legal consequences.

It is essential to approach Bounce Back Loans and other financial obligations with transparency and integrity. Seeking professional guidance and fully understanding the terms of your loan agreement are prudent steps to ensure compliance and minimise the risks of bounce back loan Fraud.


The question, “Am I personally liable for a Bounce Back Loan?” does not have a one-size-fits-all answer. The liability for a Bounce Back Loan depends on factors such as the legal structure of your business, whether personal guarantees were provided, and adherence to legal and ethical practices.

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