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Can I sell a business with an outstanding Bounce Back Loan?

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How does an outstanding Bounce Back Loan affect a business sale?

The Bounce Back Loan Scheme (BBLS) provided vital support to many businesses at the height of the Covid-19 pandemic, offering fast access to working capital under favourable terms.

Bounce Back Loans remain a key liability on company balance sheets, and if you’re thinking of selling your business you may be wondering if an outstanding Bounce Back Loan will be a roadblock to a sale.

The type of sale you undertake determines whether or not a buyer would take on this liability – essentially, whether you choose an asset sale or a sale of shares.

What type of sale are you considering?

Asset sales

An asset sale involves selling certain assets rather than the entire business. This may be a good option if you’re looking to streamline your business and you own assets that are of value to other businesses.

In this type of sale, potential buyers are typically looking to acquire specific assets without taking on the business’s debts. A share sale, on the other hand, means the buyer purchases the business outright.

Share sales

In a sale of shares, the new owner takes on responsibility for the company’s Bounce Back Loan and other balance sheet liabilities. These will be disclosed early on in the selling process, with further scrutiny of the at the buyer due diligence stage.

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Potential liabilities under a share sale

There may be other longer-term business borrowing on the balance sheet alongside your Bounce Back Loan, which the prospective purchaser will need to take on if they buy the business outright.

Long-term business liabilities are those that extend beyond 12 months for repayment, whereas shorter-term debt, or current liabilities, are repaid within 12 months.

Selling a business with an outstanding Bounce Back Loan

Whether or not you can sell your business with debts, such as a Bounce Back Loan, largely depends on the level of debt outstanding, the number and value of company assets, and your flexibility in negotiations.

Regardless of the type of sale, preparing well in advance is always advisable, but particularly so if the company is carrying significant debt.

Will buyers take on an outstanding Bounce Back Loan?

An extended timeframe to sell the business offers you the opportunity to repay some or all of the debt in the years leading up to the sale and present an improved proposition to the market.

If a Bounce Back Loan exists when the business is marketed for sale, it may reduce its value to the extent of the debt remaining. Essentially, buyers will be attracted to a company with few liabilities and overheads.

Although you can sell a business with an outstanding Bounce Back Loan, the existence of this or other debts on the balance sheet could potentially mean you need to reappraise your expectations on price.

Selling My Business are business transfer agents with extensive experience in valuing and selling a business with debt. We can provide more professional insight into the likely implications of selling a business with an outstanding Bounce Back Loan. Please get in touch to find out more.

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