Pay as you grow: Your essential guide to repaying your Bounce Back Loan

This article takes into account the government’s Pay as You Grow support initially announced in September 2020 and the full details released in February 2021. The details were correct at the time of writing (26/2/21).

Please also note that this article relates only to Bounce Back Loans, not to CBILs or other government backed financial support in response to the pandemic.

Author: Simon Murrells   |   Date: 3rd March 2021

Bounce Back Loans

The Bounce Back Loan scheme was established in March 2020 and, at the time of writing, remains open to applications until 31st March 2021.

The Bounce Back Loan scheme was put in place to support UK based small and medium sized businesses that had suffered an adverse financial impact due to the pandemic.

The scheme allows businesses to borrow between £2,000 and £50,000 subject to a maximum of 25% of their turnover.

Bounce Back Loans were an attractive offering to many businesses due to the 12 month delay in beginning repayments, a low fixed interest rate and no fees. Furthermore, being 100% backed by the government, lenders were confident to make loans to businesses without applying their usual lending criteria.

Repaying your Bounce Back Loan

Initially Bounce Back Loans were required to be repaid over up to six years, following the 12 month no repayment period. There is no fee for making early, or lump sum, repayments throughout the term of the loan.

Initially announced in September 2020, the government has now released full details of the Pay as You Grow scheme to help businesses manage Bounce Back Loan repayments in the light of the ongoing economic impact of the pandemic.

Businesses are now able to:

  • Extend the term of the loan to 10 years
  • Choose to make interest only repayments for up to six months, on three occasions during the loan term
  • Take a single, six month repayment break during the loan term.

The first Bounce Back Loans will become due to start being repaid in the coming weeks. This means it is time for businesses to start planning how they will manage the repayments.

What should you do now?

If you are one of the hardest hit businesses, it’s likely that you already know you need to take advantage of a further six month delay to repayments. Or that you need to extend the term of your loan from six years.

For other businesses however, extending the loan repayment period or delaying the start of repayments may not be such a clear cut decision.

In all instances you will need to speak to your lender to take advantage of any flexible arrangements.

How can Accountancy Solutions help?

If you aren’t sure what to do for the best, you aren’t alone.

The Accountancy Solutions team is already helping clients assess the financial strength of their business, model different cash flow scenarios and offer a sounding board to work through the implications of different decisions.

If you need help to work out what, if any, action you need to take when it comes to repaying your Bounce Back Loan, get in touch here or call 01962 462007

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