In most cases, you are not personally liable for a Bounce Back Loan, because the scheme was designed without a personal guarantee from the director. Bounce back loan personal liability only becomes a real risk if the loan was misused, or if a director's conduct around the company's insolvency was improper. For the vast majority of directors who borrowed in good faith and used the money for the business, the company owes the debt — not the individual.
That said, "no personal guarantee" is not the same as "no risk under any circumstances". This article explains the general rule, the situations where the position can change, and how to check where you actually stand before assuming either the best or the worst.
The general rule: no personal guarantee on a Bounce Back Loan
The Bounce Back Loan Scheme (BBLS) was built to be fast and low-friction for small businesses during the coronavirus pandemic. Lenders were told not to take personal guarantees from directors, and not to take a fixed or floating charge over personal assets such as a family home.
This means that if the loan was properly applied for, used for the benefit of the business, and the company simply cannot repay it because trading conditions were poor, the debt sits with the limited company. If the company later closes down through liquidation, the loan is generally written off as an unsecured company debt, not chased against the director personally.
- No director had to sign a personal guarantee to get a Bounce Back Loan.
- Lenders could not take security over a director's home or personal savings.
- Limited liability still applies — the company, not the individual, is the borrower.
Why the government guarantee is not the same as your protection
It's easy to confuse two different guarantees, and this is where a lot of director anxiety comes from. The government guaranteed 100% of the loan to the lender, not to the director. This guarantee exists so that banks were willing to lend quickly with minimal checks; it is not a shield around the individual borrower.
If the loan is not repaid, the lender claims the guaranteed amount back from the government under the BBLS terms set out by the gov.uk guidance on the Bounce Back Loan Scheme. That process runs between the lender and the government — it does not, on its own, create a debt against the director. Personal liability only enters the picture through separate, specific legal routes, covered below.
When Bounce Back Loan personal liability can still arise
Bounce back loan personal guarantee arrangements were not part of the standard scheme, but a director can still become personally liable in narrower circumstances. This usually happens when the company enters insolvency and a liquidator or administrator reviews how the loan was used and how the director behaved.
The main routes to personal liability include:
- Fraud or misrepresentation on the loan application, such as overstating turnover or applying for more than one Bounce Back Loan for the same business.
- Money used for personal benefit rather than the business — for example, paying it into a personal account or using it to clear personal debts.
- Wrongful or fraudulent trading if the director kept borrowing or trading while knowing there was no reasonable prospect of avoiding insolvency.
- Breach of director duties more generally, investigated once the company is in a formal insolvency process.
None of these are automatic. They require a finding by a liquidator or the court, based on the specific facts of how the loan was obtained and spent.
Misuse, preferences and misfeasance explained simply
Directors often hear terms like "misfeasance" or "preference" without a plain explanation. Here is what they actually mean.
Misfeasance
Misfeasance is a breach of a director's duty that causes loss to the company — for example, misapplying company funds. Under section 212 of the Insolvency Act 1986, a liquidator can apply to the court for the director to repay money or contribute to company assets where misfeasance is found.
Preferences
A preference is when a company pays off one creditor — including a director themselves — ahead of others, in a way that puts that creditor in a better position than they would otherwise be in on liquidation. Section 239 of the Insolvency Act 1986 allows a liquidator to unwind preferences given in the two years before insolvency if a director was connected to the payment.
Loan misuse
If Bounce Back Loan funds were used for anything other than "the economic benefit of the business" — the condition set by the scheme rules — a liquidator can treat that as grounds to pursue the director personally for that portion of the loan, separately from the general "no guarantee" position.
What happens to the loan if the company is liquidated
When a company that took a Bounce Back Loan goes into liquidation and the loan was used properly, the outstanding balance is treated as an unsecured debt of the company. It ranks alongside other unsecured creditors and is written off if there are insufficient assets — the director walks away without personal exposure to that debt.
The liquidator's job includes reviewing the company's financial history, including how and when the Bounce Back Loan was spent. If you're already worried about what happens after default, our guide on Bounce Back Loan default: what happens next? sets out the process step by step, and if repayments have simply become unaffordable, the options in can't repay your Bounce Back Loan? Options explained are worth reading before you make any decisions.
How to check where you actually stand
Am I personally liable for my Bounce Back Loan is rarely a yes-or-no question until someone looks at the specific facts. A few practical checks can help you understand your own position before you speak to anyone:
- Gather the original loan application and confirm exactly what was declared about turnover and business use.
- List what the funds were actually spent on, ideally against bank statements.
- Check whether more than one Bounce Back Loan was applied for across connected businesses.
- Note the company's financial position at the time the loan was drawn down and since.
Personal liability for company debts is a broader topic than just Bounce Back Loans, and it's worth understanding the wider picture — our article on am I personally liable for company debts? covers the general rules that sit alongside this scheme-specific position.
Frequently asked questions
Is my home at risk because of a Bounce Back Loan?
Not under the standard terms of the scheme. Lenders were not permitted to take security over a director's home for a Bounce Back Loan, so in the ordinary case your home is not directly at risk from this debt.
Will a Bounce Back Loan affect my personal credit rating?
Because the loan was made to the company, not to the director personally, it should not appear on your personal credit file or affect your personal credit rating in the standard scenario.
What if there were multiple directors — are we all liable?
Where liability can arise, it usually follows from an individual director's own conduct, such as who authorised misuse of the funds. It isn't automatically shared equally between every director simply because they held the title.
Can I be pursued personally just because the company can't repay the loan?
No. An inability to repay because the business struggled is not, by itself, a basis for personal liability. That is precisely the risk the scheme's guarantee was designed to absorb.
Does dissolving the company instead of liquidating it change anything?
Dissolving a company with an outstanding Bounce Back Loan without properly notifying the lender is treated seriously and can itself trigger scrutiny of the director's conduct, so it should not be seen as a shortcut around the debt.
This article is general information, not legal, financial or insolvency advice, and it doesn't take account of your company's specific circumstances.
If you'd like to talk through your position with someone qualified, Harbourfirst can introduce you to a regulated insolvency specialist — start an enquiry.