Bounce Back Loan Repayments
For those who applied for the Bounce Back Loans last year, your repayments may now be starting. However, with the ongoing business closures through isolation, many businesses are still struggling. So, what happens now?
The Bounce Back Loan was introduced at the start of the pandemic to allow small business to access loans quickly and confidently. The amount people could borrow was between £2,000 and £50,000.
For the first 12 months, no repayments were due, and no interest being charged on the loans. This was to give companies a period to help them get back on their feet. After the 12 months, interest will be charged at a flat rate of 2.5%.
Pay As You Grow
Rishi Sunak has introduced a new repayment option which provides more flexibility. He has dubbed this “Pay As You Grow.” It gives borrowers an option to tailor their repayments around their circumstances.
This will allow you to delay repayments by up to 6 months and is available from the first repayment. Also, it gives those who borrowed through the Bounce Back to be able to extend the length of their loans from 6 to 10 years. The benefit of this would be that the monthly repayments would be reduced by almost a half.
Your lender is supposed to be proactive and inform you directly of this scheme. They will contact you 3 months before you first repayments are due.
A summary of the available options;
- Extend the length of the loan from 6 to 10 years
- Make interest only payments for 6 months – can be used 3 times through the loan repayment period
- Pause payments entirely – for up to 6 months.
Who is responsible for the loan?
The government backed the Bounce Backs with a 100% guarantee. This means that if you are unable to repay the loans, then they are responsible for repaying the loan to the lender.
However, there is one occasion where this definitely not be the case… fraud. If there is proven evidence that the loan has been misused, e.g. if went towards benefiting you personally, then the borrower will be held personally liable for repayment.
Can’t afford to make the repayments?
There may be other factors in play that will mean your business is seeing a decline, leading to an increase in the business’ financial difficulties. Now is a good time to get in touch with your accountant. Together you can look at cash flow forecasts to see what systems can be put in place, to help reduce any outgoings and other cost saving scenarios.
One example is that you may be able to agree a Time To Pay arrangement with HMRC. This will help ease the tax that is due on the promise that you will pay all the tax that is due. These are generally for up to a period 12 months.
If you are struggling to get by, even while making the most of the new Pay As You Grow scheme, then it may be time to start looking at other options. Such as restructuring company debts and voluntary liquidation. An Insolvency practitioner would then get involved to help you through this process.
Big Hand is here to help you with your financial needs. To get started, get in touch today on 0161 327 2911.