Bounce Back Loans and Personal Liability: What Directors Still Need to Know in 2026
Bounce Back Loans had no personal guarantee for the director — but that protection has limits. Here is what still puts a director's personal assets at risk years after the scheme closed.
The Original No-Personal-Guarantee Design
Bounce Back Loans (BBLS) were introduced as an emergency coronavirus support measure, offering loans of up to £50,000 (capped at 25% of turnover) to smaller businesses, with a key feature that distinguished it from other support schemes: no personal guarantee was required from the company's directors. The 100% government guarantee sat with the lender, not the individual.
This was different from the Coronavirus Business Interruption Loan Scheme (CBILS), where personal guarantees could be required for larger facilities. The BBL design specifically removed this barrier to encourage rapid, wide take-up among small businesses.
Where Personal Risk Still Exists
The absence of a personal guarantee does not mean directors are immune from all consequences if things go wrong. Personal exposure can still arise through general insolvency and company law, in these situations:
| Risk | How it arises |
|---|---|
| Wrongful trading | Continuing to trade (and incur further debt) after the director knew or should have known insolvency was unavoidable, without taking steps to minimise creditor loss |
| Fraudulent trading | Deliberately using the company to defraud creditors — a much more serious finding with potential criminal consequences |
| Loan misuse | Spending BBL funds on non-business purposes (personal expenses, dividends beyond scheme rules) contrary to the declaration made in the loan application |
| False application information | Misrepresenting turnover, trading status, or other eligibility criteria when applying |
| Overdrawn director's loan account | Separate from the BBL itself, but a director who has taken more from the company than they're owed can be personally liable to repay that on insolvency |
None of these mechanisms come from the Bounce Back Loan's own terms (which remain guarantee-free) — they come from general insolvency law (principally the Insolvency Act 1986) and the extended investigatory powers specific to BBL misuse.
The Dissolved Companies Act: Closing the Loophole
Early in the scheme's life, there was concern that some directors were simply dissolving their companies (via voluntary strike-off) to avoid repaying BBL debt, since the standard company disqualification regime only applied to companies that went through formal insolvency (liquidation/administration), not simple dissolution.
The Ratings (Coronavirus) and Directors Disqualification (Dissolved Companies) Act 2021 closed this gap, extending the Insolvency Service's power to investigate and disqualify directors of companies that were dissolved, not just those formally wound up. This gives investigators several years of retrospective reach — disqualification action relating to BBL misuse has continued well beyond the scheme's original closure date, and remains an active enforcement area.
What Happens If the Company Genuinely Can't Repay
If a company took out a Bounce Back Loan properly, used the funds for legitimate business purposes, and later becomes insolvent through ordinary business failure (not misconduct), the position is generally straightforward:
- The lender's claim against the company ranks as an unsecured creditor claim in the insolvency process.
- Because of the government's 100% guarantee on BBLS, the lender recovers the unpaid balance from the government scheme, not by pursuing the director personally.
- The director's personal assets are not at risk from the loan itself, provided there's no evidence of wrongful trading, fraud or misuse.
This is precisely the protection the no-personal-guarantee design was intended to provide — it just doesn't extend to genuine wrongdoing.
Practical Guidance for Directors With an Outstanding BBL
| Situation | Recommended action |
|---|---|
| Company trading but struggling to make repayments | Contact your lender directly about repayment flexibility; document the conversation |
| Company facing genuine insolvency | Seek professional insolvency advice promptly — acting early reduces wrongful trading risk significantly |
| Uncertain whether the loan was used entirely for business purposes | Review records now; gather evidence of how funds were spent in case of future enquiry |
| Considering informally winding down / dissolving the company | Take advice first — dissolution while a BBL remains unpaid can trigger investigation under the Dissolved Companies Act powers |
The overarching lesson for 2026: the no-personal-guarantee feature of Bounce Back Loans remains real and valuable, but it was never a blanket shield against director misconduct — and enforcement activity targeting genuine misuse has continued well past the scheme's original operational period.
Frequently asked questions
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