If you’re struggling to make your monthly repayment on your Bounce Back Loan, you may be considering contacting your lender to discuss what bounce back loan repayment extension options are available. This will enable the repayments to be more manageable over a longer period of time.
Although you cannot lower the interest rates of your loan, there are steps you can take to reduce monthly repayments and extend the duration of your loan.
Table of Contents
- How long can you pay a Bounce Back Loan over?
- What happens if I can’t make my Bounce Back Loan repayment?
- Loan funds used for any purpose that was not directly beneficial to the company
- Making preferential payments to certain creditors over others
- Can the repayment period of the Bounce Back Loan be extended?
- What are the implications of extending a Bounce Back Loan mean?
- Bounce Back Loan repayment options
- Have the Bounce Back Loan repayment terms changed?
- What happens if I decide to extend my Bounce Back Loan?
- Is it a good idea to get an extension on Bounce Back Loan repayment?
- The process of extending your Bounce Back Loan
- Is it still possible to apply for a new Bounce Back Loan?
How long can you pay a Bounce Back Loan over?
When you first signed the agreement of your Bounce Back Loan Scheme (BBL), you will most likely have signed to repay the loan over a fixed six year period.
The first twelve months act as a repayment holiday, during which the government will pay for you. You only begin to repay this amount after these 12 months have passed.
What happens if I can’t make my Bounce Back Loan repayment?
In almost all circumstances, you will not be held liable for repayments on your BBL if the company is liquidated or unable to repay the debt.
The main perk of BBL was the government ensuring banks that they would reimburse them if the company could not repay its debts. Consequently, if a company defaults on its payments, directors are not legally liable; instead, the state will pay back the bank.
However, there are two possible scenarios in which you personal liability may arise:
Loan funds used for any purpose that was not directly beneficial to the company
Although there are few rules for a BBL, some directors have been known to use the funds inappropriately for personal gain (for example, using the funds to purchase a vehicle or other personal assets). If a company is placed into Administration or Liquidation, an insolvency practitioner must be appointed..
One of the investigator’s roles is to explore the motives for the company’s insolvency. If they find that the directors have used the loan for themselves instead of benefiting the company–which is called misfeasance–then those directors will be held accountable.
Making preferential payments to certain creditors over others
If you’re a company director, under the terms of a BBL you can use the funds towards existing debt repayments. Though, if repayments are made to certain creditors before others, preferential payments could be made which would then lead to being held personally liable.
For example, if you decide to repay a loan from somebody who is connected to you, such as a friend, while other creditors like HMRC are left unpaid, this will be considered a preferential payment.
If insolvency practitioners find that the BBL was used to pay back certain creditors but not others, directors could be held personally liable for the value of the repayments.
If you are having difficulties paying off your BBL loan or anticipate future monetary trouble, it is critical that you reach out to an expert for help right away.
Can the repayment period of the Bounce Back Loan be extended?
Yes, with the new Pay As You Grow Scheme, you can extend your BBL repayments from 6 years up to 10 years.
This initiative was introduced following reports that many companies would not be able to make their BBL repayments over a six-year period.
What are the implications of extending a Bounce Back Loan mean?
By lengthening your BBL, you agree to a 10 year repayment plan instead of the 6 years initially decided upon. This could drop your monthly payments by almost half and give some much needed financial breathing room as your business stabilises.
Note that lengthening the repayment period of your BBL will also increase the amount of interest you’ll end up paying. Although the fixed rate of 2.5% remains unchanged, you’ll now be making payments for four additional years. In total, this will cost more than if adhering to the initial six-year agreement.
Bounce Back Loan repayment options
The Pay As You Grow scheme was designed to assist businesses who have trouble making their loan payments.
If you’re finding it difficult to afford your BBL, there are three primary ways the Pay As You Grow scheme could be of help:
- You can push back your repayments by six more months. This is in addition to the 12 month repayment holiday you’re given when you take out a BBL. You don’t need to have already made any repayments to qualify.
- If you’re struggling to make monthly repayments, you can lengthen the repayment loan term from six to ten years. This will enable you to halve your monthly payments and hopefully ease some strain on your cash flow.
- You are allowed to request interest-only payments for six months, which will in turn lower your monthly repayments and prevent you from gaining any extra interest. You can select this Pay As You Grow option three times during the lifetime of the loan.
Have the Bounce Back Loan repayment terms changed?
The Gov.uk press release from April 2021 announced three new options for BBLs (as detailed above).
It’s important to note that BBLs already carry a 12 month grace period of no repayments or interest, but this can now be extended to 18 months by delaying the repayments by six months.
If you think any of these changes could benefit your small business, reach out to your lender for more information.
What happens if I decide to extend my Bounce Back Loan?
If you opt to extend your BBL, you will be repaying the loan during 10 years as opposed to the preliminary agreement of 6 years.
This can reduce some of the economic tension that your business may experience, as your monthly installments will be nearly divided in half. This could enable you to channel these funds into other facets of the company which need it most critically.
Is it a good idea to get an extension on Bounce Back Loan repayment?
Extending an existing Bounce Back Loan is an effective way for some businesses to keep up with their repayment obligations. As BBLs were originally taken out with a 2.5% interest rate, extending the loan term is a cost-effective way of freeing up cash flows rather than taking out an alternative form of funding.
However, for some people, getting an extension on their loan may not be enough. If you’re worried that your company can’t repay its debts, it’s important to ask for professional help and guidance.
The process of extending your Bounce Back Loan
You can extend your BBL through the Pay As You Grow scheme by speaking to your lender, who will go over all of the available options with you. You could potentially extend your loan out to 10 years, or make only interest payments for 6 months.
If you are unsure which option is the best choice for you, or you fear that none of the options will be effective in helping you repay the loan, seek expert advice.
At Company Doctor, we always put our clients first. If you’re struggling to repay a loan, reach out to us today for help. We specialise in finding the best solution for your unique circumstances after taking the time to carefully assess your individual situation.
Is it still possible to apply for a new Bounce Back Loan?
The Bounce Back Loan Scheme closed to new applicants in March 2021, and you cannot apply at this time.
If you are struggling with finances within your business including an outstanding Bounce Back Loan, get in touch with us here at Company Doctor today on 0800 169 1536 or complete the online form. By speaking with one of our friendly advisors, we can discuss all your options with you including company liquidation if this is applicable.