Bounce Back Loan Repayments – Your Options.

The Bounce Back Loan Scheme was launched on 4th May 2020, to support small businesses faced with the uncertainty of the first Coronavirus Lockdown. This week, we’ve heard from several clients who were amongst the first to receive their funds, and who will therefore be among the first to reach the end of the initial twelve month repayment-free period.

Each of these clients has received a notification from their lender, warning that they will be due to start making their repayments in around two months time.

You do have other options though!

As part of the Spring budget earlier this month, it was announced that the ‘Pay as you Grow‘ amendments to the scheme will offer several other options to businesses. These amendments are designed to allow borrowers to adjust their repayment schedule to better suit their business situation.

Given that many affected businesses are still unable to trade fully until we come out of Lockdown 3, if at all, these changes were vital.

  • Businesses now have the chance to extend their loans from six to ten years at the same interest rate, which could almost halve the monthly repayments.
  • They can make interest only payments for six months, up to three times within the repayment schedule.
  • They can choose to pause repayments for up to six months. There is only one chance to take a six month repayment holiday within the term of the loan.

This last option was already in place, but a minimum of six monthly payments had to have been made before the payment holiday could start. This is no longer required, allowing businesses up to 18 months after drawing funds before they need to start their repayments.

Lenders will contact all borrowers to let them know the options they now have available to them, in plenty of time before the first repayments are due.

How do you decide which option is best?

This may need careful thought!

  • Many business owners applied for a Bounce Back loan because they just didn’t know what was going to happen as the pandemic continued.
    • Some of those businesses have reopened, and still have the Bounce Back loan sitting in a separate bank account, untouched.
    • Some of those businesses have only needed a small amount of their loan amount, and still have the balance.
  • Some businesses have used the full amount they borrowed but are still unable to reopen, so have no income to start making repayments at any level.

If you haven’t yet needed your loan, you can of course repay the full amount now, and avoid the need to make any repayments. What we don’t know though, is whether the Roadmap that we are currently following will stay on track, and whether the end of Lockdown will signal a full, permanent reopening of the economy.

If it isn’t, you may well decide to hold on to some of that extra cash as a safety net.

Our advice would be to consider carefully what your plans are for the business for the next couple of years. Are there any gaps in your cashflow that supports those plans?

If you haven’t yet been able to reopen, but have still been able to hold on to the Bounce Back loan, do you have enough reserves to ride out any further enforced closures? Again, having a good look at your cashflow will help you decide.

Don’t rush your decision.

The first repayments aren’t due just yet, so you do have time to give this some careful thought. In fact, you probably have more chance to consider this decision than you did the original application, which for many people was a very quick decision, based as much in fear of the unknown as anything else.

Now is your chance to really work out where you are, where you are going now that we are coming through to a period of reopening, and potentially of pent-up demand.

As ever, if you’d like to chat through the decision making process, please get in touch. We’re very happy to help where we can.

 

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