What Bounce Back Loan options do you have when repayments are due?
The point of this blog is to help businesses who have taken out Bounce Back Loans and their payment holiday is coming to an end. You will find below some Bounce Back options to consider which you may find useful.
When is your first payment due on the Bounce Back Loan?
Banks and lenders are now actively writing to borrowers who took Bounce Back loans coming up to 12 months ago. The lenders are advising the businesses of their options under the new Pay as You Grow (PAYG) scheme.
The Pay As You Grow Scheme allows:
- Payment terms to be increased from six to ten years.
- Make interest only repayments for six months. This option can be used up to three times during the life of the loan
- Apply for a six month payment window. This option can only be used once during the life of the loan.
Borrowers can choose to use either of the choices above either on their own or choose to mix with one another. The lender will also offer no repayment penalties should the business want to repay the loan early.
Banks and lenders are notifying the businesses about the Bounce Back Loan options around 12 weeks before the first repayment is due to be made.
How can you reduce interest costs on your Bounce Back loan?
Ideally the main way to reduce interest costs is to not take advantage of the PAYG options and to keep with your repayments. If you can overpay or even better pay off in full then this should also be considered.
A Bounce Back loan is one of the cheapest forms of borrowing for over a decade. If your business is in the position to repay in full it may be a consideration to retain and use again in the future.
Can we look to refinance a Bounce Back Loan?
If you are quick and you can apply before the end of March 2021 then you may have the option to convert the BBL into a CBILS. This would extend your interest free payment by a further 12 months, however, you would be converting the cheap 2.5% interest rate into something higher.
Your business needs to have £200,000 or more to apply for a CBILs as CBILS start at £50,000 and the main criteria is that they represent 25% of your turnover.
It may not be cost effective to complete a Bounce Back Loan conversion to CBILs but this all depends on everyone’s circumstances.
What if you can’t make the repayments due on the Bounce Back Loan?
Lenders are expecting a large number of enquiries relating to this nature as not every business is back up and running. Under the PAYG scheme you can choose to extend the payment holiday by another six months. The government and lenders are anticipating a return to some kind of normality from summer 2021 onwards.
Professional Debt Advice
Most businesses can look to get free impartial debt advice from no-for-profit debt advice services. Alternatively get in touch and we can introduce your business to a professional team of Business Recovery specialists who can talk you through your options.
Restructuring and Insolvency Practitioners (IPs)
In a worst case scenario and your business is unable to Bounce Back then you will need to seek professional assistance. We work closely with a number of Insolvency Practitioners (IPS) who can provide advice on business restructuring and insolvency, should you need to discuss these options with your lender.
Talk to the specialists.
Without a doubt speaking to a specialist Business Finance brokerage would be beneficial for many business owners. Lenders are reacting to the pandemic and government advice which can be confusing for the borrower.
We can help offer FREE advice and FREE processing of any type of application. There is no one size fits all solution and many businesses have different needs and requirements. We can help guide you through the many different options.
Please click below or call 0161 8211478 to speak with one of our specialists.
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- Asset Based Lending
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