Debt Advice

If you took out a Bounce Back Loan for your limited company or business as a sole trader, you will be expected to start making monthly repayments after the first anniversary of your loan.

However, you may still be uncertain about the repayments of your Bounce Back Loans. Our Insolvency Experts can help you to back on track financially and find the best option for you.

What are the repayment terms of a Bounce Back Loan?

Bounce Back Loans (BBL) had an initial repayment term agreement of 6 years, but you can repay early without paying extra fees. Every loan has a fixed interest rate of 2.5% per annum.

However, the Government introduced the Pay As You Grow (PAYG) in 2021, allowing businesses to extend the repayment term from 6 to 10 years.

When will my Bounce Back Loan repayments start?

Your BBL repayments will start after the initial 12 month repayment holiday, which is covered by the Government who will pay back the interest to the lender.

After this 12 month period is over, the borrower is 100% liable for repaying the loan over the six-year term as per the agreement with their lender.

Will Bounce Back Loans be forgiven?

A BBL will only be given if your company enters a state of insolvency and is therefore unable to repay the loan.

However, the loans cannot be written off whilst the company is still active and trading. In this case, you may be able to negotiate the repayment terms with your lender.

How do I pay off my Bounce Back Loan?

After the 12 month repayment holiday is over, your lender will automatically start taking monthly payments from your bank account.

If you’re happy with the terms of the loan, then all you need to do is make sure that the monthly payments are being made and there is enough money in your account to cover these payments.

What are the options for restructuring a limited company with a Bounce Back Loan?

Keeping up with the repayments for BBLs can cause deeper financial difficulty within your company. If this is the case, there are restructuring paths that could turn the situation around.

For a business that requires extensive restructuring, placing the company into Administration allows for this process to be complete without any threats of legal action from creditors.

A period of suspension, known as a moratorium, is placed around the company while it is in administration, meaning it cannot be forcibly wound up during this time.

Viable elements of the business may be rescued by Insolvency Practitioners, allowing trade to continue and jobs to be saved.

Can I get a Bounce Back Loan extension?

Yes, you can get an extension on a BBL using the PAYG scheme, but there are a few factors to be aware of.

All BBL extensions will still have the same fixed rate of 2.5% applied to the length of the loan, but increasing the loan term means that you will actually be paying more interest. This is because the interest will be on the balance of 10 years rather than 6.

Extending the term of the loan may be hugely beneficial for some businesses, looking from a cash flow perspective. By extending the payments to 10 years, the monthly repayments will be almost half of what they are under a 6 year term.

Can I make flexible payments on my Bounce Back Loan?

Yes, again under the PAYG scheme, there are two options you can take:

You can take an additional repayment holiday of 6 months.

During this period, you wont make any capital repayments, but the total amount you owe will go up.

For example, this would make the total amount payable on a £50,000 loan increase from £54,431.60 to £55,100.49, unless you repay early.

You can only use this option once during the term of your BBL.

Alternatively, you can reduce your monthly repayments for 6 months by paying interest-only.

For example, on a loan of £50,000, this would reduce the monthly repayments from £939.49 to approximately £106.16 during the 6 month period.

You’ll pay more interest overall though, meaning that the total amount repayable on a £50,000 loan will increase from £54,431.60 to £55,056.94, unless you repay early.

This option is available up to three times during the term of your BBL.

Can I close my company with a Bounce Back Loan?

The correct way to close your company with a BBL is through Voluntary Liquidation.

Attempting to dissolve your business whilst you still have to repay your BBL will likely be objected to, since dissolution is only available for limited companies which have no debt, and which simply need to be struck off the Companies House register.

You can find out more about dissolving your company with a BBL by reading our dedicated guide.

Is there an early repayment charge on a Bounce Back Loan?

No, there are no early repayment charges on a BBL. If you no longer need the loan, you can choose to pay it back early, which means you’ll pay less interest.

You also won’t pay any interest if you pay the full amount before the end of your initial 12-month repayment holiday.

Can I consolidate a Bounce Back Loan with another loan?

Yes, you can consolidate a BBL with another loan.

Given that the BBL is interest-free for the first 12 months and has a low interest rate of 2.5%, it may be beneficial to pay off existing debts that are more expensive.

This may also improve the cash flow of your business.

How do Bounce Back Loan repayments work if I am self-employed?

Just like a limited company, if you’re self employed, the repayment should automatically be paid to your lender each month.

Depending on how your business operates, this may come out of a separate business account, or your own personal account.

Will Bounce Back Loans be written off if you are a sole trader?

Unfortunately, if you cannot repay your loan as a sole trader, it will not be written off. The only way to “write off” a self-employed sole trader’s BBL debt is to enter a formal insolvency process.

You can apply for an Individual Voluntary Agreement (IVA), in which the BBL is treated as unsecured debt, which can be included in the arrangement.

Once the agreed amount has been repaid, the remaining amount of unpaid, unsecured debt is written off.

Unfortunately, as a sole trader, if you cannot pay back your BBL and an IVA is not a viable option, you do not have the protection of a limited company.

Legally speaking, there is no distinction between personal and business assets; therefore, you may be held personally liable for the amount owed.

What will happen if I can’t pay my Bounce Back Loan?

If you cannot repay your BBL, the banks will turn to the Government for the loan repayments. However, the only way this is possible is if the company enters some state of formal insolvency, such as Liquidation.

During Liquidation, a BBL is turned into unsecured debt and will be written off and repaid by the Government.

However, if during the insolvency process, the appointed Insolvency Practitioner (IP) found that funds were not used “to provide an economic benefit to the business”, directors can be held personally liable for the remaining repayments of the loan.

Read our guide on Bounce Back Loans and personal liability to find out more.

What to do if you can’t repay your Bounce Back Loan

If you cannot repay your BBL, it is imperative that you get professional help and advice to get you through these difficult times.

At The Insolvency Experts, our team of expert advisors are here to provide you with the help and advice you need during challenging financial times. We will take the time to assess your situation and help you understand all the options open to you.

How do I Pay off my Bounce Back Loan?