Bounce Back Loan Scheme repayment options – Pay As You Grow

Many business owners accessed the government backed Bounce Bank Loan scheme (BBLS) and £47.36 billion of loans were approved under the scheme before it closed to applications on 31/3/21.

A recent British Business Bank report estimated that between 10-34% of BBLS borrowers could have permanently ceased trading in 2020 without the scheme. However, as businesses begin to repay those loans, it is important that they are fully aware of their options.

All businesses who accessed the scheme were provided with a 6 year loan and benefited from no capital repayments in the first 12 months, with the government picking up the interest cost on those loans for that period. They will have now commenced repayment of the loans over the remaining period of 5 years and repayment of that loan will still be a challenge to many against the backdrop of continued economic uncertainty.

However, there are options to ease the financial burden via the Pay As you Grow (PAYG) scheme.

All accredited BBLS lenders are obliged to offer to:

• Extend the loan to a period of 10 years in total – effectively increasing the remaining loan term up to 9 years which will significantly reduce the monthly loan repayments.
• Allow the borrower to make interest only repayments for six months – reducing the loan repayments – this option can be accessed three times during the term of the loan.
• Allow the borrower to make no repayments (capital and interest) for six months – freeing up cashflow at a crucial time for the business owner – this option can be accessed once during the term of the loan.

All these options can be accessed by the borrower during their loan term and at the same fixed rate of 2.5%, which when compared to a base rate of 1.25% (which is widely expected to increase further) is an extremely attractive rate to hold on to for as long as possible to aid business growth.

Most BBLS lenders allow you to access these options via their online banking portal and there is no requirement to provide any additional financial information.

Remember, whilst accessing these options will reduce current loan repayments and aid cashflow it will increase the total interest payable and with some options mean loan repayments will rise after the end of the capital and/or interest free period.

Businesses should always seek advice when seeking borrowing or raising finance. Our team can help guide you and provide assistance. If you would like to discuss your options or would like further information, please get in touch.