Updated: 10th August 2021
If you are experiencing problems keeping up with the monthly repayments on your Bounce Back Loan, you may be considering the options available to help make this more manageable and more sustainable over the long-term. While Bounce Back Loans were offered with extremely generous terms – such as no repayments for the first 12 months, a fixed rate of interest, as well as no need to provide a personal guarantee – the fact is these loans do still need to be paid back by the companies which took them out.
While you cannot change the interest rate on the borrowing, there is a way you can reduce the monthly cost of your Bounce Back Loan, and that is by increasing the length of the loan.
Extending your Bounce Back Loan repayment term is now possible thanks to an initiative known as the Pay As You Grow (PAYG) scheme. This scheme was introduced following fears that many companies would not be in a position to keep up with the repayments on their Bounce Back Loans while the economy was still in recovery mode following the Covid-19 pandemic.
By extending your Bounce Back Loan you will pay off the balance over 10 years, rather than the 6 years you originally agreed to. The major advantage of extending your Bounce Back Loan in this way is that your monthly repayments will almost half; a move which could free up vital cash flow while your company is finding its feet once again post-pandemic.
However, by increasing the length of your Bounce Back Loan, you are also increasing the amount of interest you will be paying over the life of the loan. While the fixed 2.5% rate of interest will be applied to the full 10 years, as you will be paying interest for an additional four years, this will cost you more overall than sticking to the 6-year repayment term.
For some companies, however, increasing the term of the loan to allow for reduced monthly payments, is the only way they will be able to afford to keep up with their obligations. As Bounce Back Loans were offered with a market-leading 2.5% rate of interest, extending the term of your loan is likely to be a more cost-effective way of freeing up cash flow than taking out an alternative form of funding.
While the offer of a repayment extension will help many businesses balance their finances; for others it will simply not be enough. If you are concerned that your company is unable to repay its Bounce Back Loan or any other form of borrowing it may have, it is vital you seek expert help and advice as a matter of urgency.
A licensed insolvency practitioner will be able to assess your company’s current position, and help you understand what options are available to help your business bounce back. This may involve a process of restructuring, negotiating with creditors, or obtaining a flexible form of funding to help ease cash flow worries.
If the effect of lengthy closures due to government-imposed lockdowns has taken your business beyond the point of rescue, we can talk you through how to close the company in an orderly manner. This will mean placing the company into a formal liquidation process, as company strike off is not an option when there is an outstanding Bounce Back Loan in place. Call our experts today on 0800 644 6080 for immediate help and advice with your Bounce Back Loan.