The Bounce Back Loan Scheme (BBLS) was launched to support small and medium businesses to access emergency finance quickly during the coronavirus outbreak, enabling them to borrow between £2,000 and £50,000 with no repayments in the first year, and the interest accrued being covered by the government. For loans larger than £50,000, the Coronavirus Business Interruption Scheme was in place.
Please note that the BBLS and Cbil schemes closed to new applications on 31st March 2021, being replaced by the Recovery Loan Scheme. – See our separate post about this here
The important point to note is that for businesses that took out a loan in 2020, their loan repayments are about to start and so businesses should be factoring in the additional cashflow expense of this.
Lenders are aware that we (at the time of writing) are not fully free from the effects of the Covid-19 pandemic, and as such have created some flexibility in regards to the repayments and loan.
Your lender will be getting in touch with you three months before your repayments are due to start and talk you through your repayment options.
A new element, Pay As You Grow (PAYG), gives you the option to chose one, two or three of the following:
- Request an extension of your loan from six years to ten, at the same interest rate of 2.5%. This could significantly reduce your monthly repayments,
- Pay the interest only for six months, (therefore reducing your monthly repayments for those six months). You can request this option up to three times during the term of the Bounce Back Loan.
- Take a repayment holiday of up to six months. You can choose this option to start immediately after the 12 months free repayment period of your loan ends. This means your first repayment could be delayed until 18 months after you first took out the loan.
However, should you take one or more of the above options, you will pay more interest overall, and if you take any repayment holidays, the term length of your loan will increase to match.
It’s worth remembering, you can repay or overpay at any time, without penalty. This gives you a great amount of flexibility and control on how much you pay now and overall.