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Planning Ahead for your Bounce Back Loans Repayment

Advice Articles

The Covid-19 pandemic has placed a great deal of pressure on businesses of all sizes and shapes across industries. Even as restrictions start to ease, some uncertainties remain. Will my customers ever fully return? What if there is another lockdown?

While the UK government has provided various support packages, it is the responsibility of the companies and directors to ensure a sensible repayment plan is put in place.

And it’s never too early to start planning so you can protect your staff and business.

What are Bounce Back Loans?

The government introduced the Bounce Back Loan Scheme (BBLS)* in May 2020 to provide ‘fast track’ financial support for businesses, particularly small companies or those who are self-employed.

Businesses could access between £2,000 and £50,000 of funding support (or 25% of total turnover), and they would not be required to pay back the loan or interests during the first 12 months. After this, an annual interest rate of 2.5% applies.

*Applications for BBLS closed in March 2021.

How do I repay my Bounce Back Loans?

Despite the fact that the first payment was due from May 2021, a recent poll by YouGov found that only 34% of businesses are aware of the different repayment options available to them.

If you are a BBLS borrower, your lender will have written to you in advance of the repayment period. But we know how hard it is to juggle everything as a sole trader or small business, so let us help by laying out the key options to save you time:

1. Make the standard monthly repayments as per the original terms agreed with your banks or lenders.

2. Repay the loan early without penalty or make regular overpayments, so you pay less interest overall.

3. Opt in to the Pay As You Grow Scheme for an extended repayment period and other flexible arrangements that suit your business. See below to find out how this works.

How does the Pay As You Grow Scheme work?

The Pay As You Grow (PAYG) Scheme was announced by the Chancellor of the Exchequer in September 2020 to help businesses with their Bounce Back Loans repayment by:

  • Delaying all repayments for a further six months, i.e. 18 months in total since borrowing.
  • Reducing monthly payment to interest-only for a six-month period. Borrowers can do this up to three times during the term of the loan.
  • Extending the length of the loans from six to ten years, i.e. reducing monthly repayments by approximately 50%.

Your lenders will contact you with all the relevant details three months before repayment starts, so we suggest you wait to hear from them before taking any action or deciding which option (you can choose more than one) would be suitable for your business.

It’s also useful to know that opting into PAYG does not affect your business’s credit score or future costs of borrowing — but it may contribute to a lender’s evaluation of how creditworthy your business is.

What should I do if I can’t pay it back?

If you have any serious concerns or cashflow problems that may impede your ability to repay your Bounce Back Loan, we advise you consult an independent advisor or your lender as early as possible. The sooner you take action, the more options are likely to be available to save your business.

Restructuring company debts, raising funds, or entering into an insolvency process are among many options to deal with your Bounce Back Loan if you are not in a position to repay it fully. Remember, the key is to act, and act quickly.

Find out more

Here are a few helpful links if you want to find out more about this topic:

Your bounce back questions answered by the Treasury - (scroll to bottom of page)

British Business Bank guide to the Bounce Back Loan scheme

All Government Business Support schemes for Coronavirus on official Gov.uk site

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