The Bounce Back Scheme created by the UK government was and has been a great help to many businesses up and down the nation, but many businesses are now facing issues with their repayments.
At The Insolvency Experts, we can help you choose the best options available to help you with the repayment of your BBL.
What is the Pay As You Grow (PAYG) Bounce Back Loan scheme?
The Pay As You Grow (PAYG) scheme was introduced by the government following fears that companies may not be able to repay their Bounce Back Loan (BBL) over the original 6 year term agreement.
Under the scheme, there are three main ways of reducing your BBLs monthly repayments:
- Repaying your loan over 10 years:
By doing this, you will be able to spread your loan over an additional four years, and halve your monthly repayments which could make a huge difference to your cash flow.
If you think this would be the best option for you, you can read our guide to help you decide if you should Repay a Bounce Back Loan over 6 Years or 10 Years.
- Delaying your repayments for six months:
This option gives you the opportunity to have an extra six months of delayed repayments on top of the 12 month repayment holiday that is given when you take out the loan.
You do not need to have repaid any of your loan to qualify for this option.
- Request to make interest-only repayments for six months:
This option will reduce your monthly repayments, and will ensure you are not paying any additional interest as you would if you had taken a repayment holiday.
This option is available up to three times during the length of the loan.
How do you know if your business is eligible for the Pay As You Grow scheme?
The best way to check if your business is eligible for the PAYG scheme is by checking with your lender.
Your lender may have already communicated with you about your PAYG options, usually three months before your repayments are due to start.
Speaking to your lender will allow you to review what your options are, and how their repayment options may change in accordance to their choices of the scheme.
How many times can I use the Pay As You Grow scheme?
You can only extend your BBL once under the scheme, but this will allow you to extend it 10 years rather than the original term agreement of 6. You will however, have the same interest rate of 2.5%, meaning you will end up paying more overall.
If you expect to be in a better financial position down the line, you can reduce your monthly repayments for 6 months by making interest-only repayments. This option is available up to three times during your loan agreement.
Alternatively, you could take a six month repayment holiday. This option is only available once during your agreement term.
If you’re unsure which option is the best for you, or fear that none of the options will help with your loan repayments, we suggest speaking to our expert team.
Can a Bounce Back Loan be deferred?
Yes, you can defer your BBL loan under the PAYG scheme, as we have previously discussed.
If you are struggling to afford the current payments of your loan, but you know in a few months you will be in a better position financially, it may be a good idea to defer your loan repayments by having a 6 month repayment holiday.
However, interest will continue to accrue during these six months, so you will end up paying more over the lifetime of your loan.
Alternatively, you could pay interest-only payments for 6 months, which could temporarily reduce the repayment burden.
How long can you defer a Bounce Back Loan for?
Whether you choose to defer your BBL through making interest-only repayments or a loan holiday, this will defer your loan for 6 months.
Delaying your repayments for an additional 6 months will mean you have a repayment holiday period of 18 months since the loan was originally taken out.
Are Bounce Back Loans ever written off?
No, BBLs can not be written off. You may be able to negotiate with your lender about using one of the PAYG options, but it will not be written off.
The only way a BBL is written off is if your company enters a state of formal insolvency, such as Liquidation or Administration. During liquidation, a BBL is turned into unsecured debt and will then be written off.
Read our guide on what to do if you can’t pay your Bounce Back Loan off for more advice in this area.
Can I reduce Bounce Back Loan repayment amounts?
Yes, you can reduce your BBL repayment amounts by using the PAYG scheme.
When you choose to extend your loan to 10 years instead of the initial 6, this will reduce your overall monthly loan repayments by almost half.
This is particularly useful if your business is experiencing cash flow issues, and you think it would be beneficial to spread the costs across a longer period of time.
However, as we have mentioned, the interest rate will still be the same at 2.5%. This means you will be paying your interest rate over an extra four years, which will increase the overall repayment.
Making interest-only repayment will lessen your amount of payments during the six months, whilst also ensuring you are not paying any additional interest as you would if you took a repayment holiday.
How to defer a Bounce Back Loan
If you wish to defer your BBL, you will need to speak to your lender.
Your lender should discuss the PAYG options available with you and explain them to suit your specific situation.
If you wish to have professional help beyond your lender, you can get in touch with our friendly and professional team who will guide you through the best options for your business.
What will happen if I can’t pay my bounce back loan?
Whilst the PAYG scheme does provide many businesses with the extra breathing room they need to pay back their BBL, for some, it will simply not go far enough.
One of the main benefits of the BBL scheme is that it is government backed, meaning the banks were provided with 100% security for the government. This means no personal guarantee needed to be provided by the company in order to borrow the money.
Therefore, if the company is not able to repay the money lent to them, the government will make the repayments back to the bank.
However, you should be aware that this government guarantee is only available if the business suffers from some form of formal insolvency.
You can read our blog on liquidating your company with a BBL to find out more.
Can I close my business with an outstanding Bounce Back Loan?
For the purpose of liquidation, a BBL is treated in the same way as any loan or finance agreement. This means if the company becomes insolvent and needs to enter a formal liquidation process, the BBL would be included.
During the liquidation process, an insolvency practitioner will be appointed to handle the process. This includes identifying the assets, selling these to repay creditors and then distributing the proceeds in accordance to a set hierarchy.
After this, the company will cease to exist and any debt will be written off, including the BBL. As this type of borrowing did not require a personal guarantee, you will not be held liable for repaying the loan so long as you have used it in an appropriate manner.
If your company has an outstanding BBL or is struggling to meet its debt obligations, it is best to get in touch with our team and act quickly before things escalate.
Our friendly team of experienced insolvency practitioners will work with you closely to get you on the right path. Get in touch with us today for a free no obligation consultation.