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I Can’t Pay Back My Bounce Back Loan, What Do I Do?

The Bounce Back Loans were a lifeline for the many businesses that struggled during the heart of the pandemic, with more than a million businesses taking advantage of this government backed scheme. But three years on, while things might be better in terms of the risks to our health, the financial difficulties for many companies has not improved at all.

So what do you do if you had a Bounce Back Loan but you’re now struggling to repay it? Read on to get all the advice you need.

What is a Bounce Back Loan?

The Bounce Back Loan scheme was one of the many financial aids that the government offered businesses in 2020, during the worst time of the pandemic. It aimed to help small and medium-sized businesses borrow between £2,000 and £50,000 at a low interest rate. It was guaranteed by the government and it didn’t have to be paid back for a year.

For many businesses, this was access to well-needed funds, and it’s obvious to see why so many companies chose to take advantage of it. But one of the issues with the loan was that the future at that point was so uncertain. We hoped that before long all would return to normal and this was more of a bridging loan to help people through.

But the reality is that we have seen ongoing issues with the economy with very little signs of improvement, meaning that some companies just haven’t been able to bounce back effectively. The knock on effect then is that paying back a loan such as this becomes very difficult indeed.

Options Available

If you’re facing difficulties in paying back your loan, then the first step is to explore all of the options available – and there are quite a few.

Pay As You Grow

Initially, make sure you’ve explored the standard Pay As You Grow support that everyone with a Bounce Back Loan has access to. There are different parts to this, depending on what might be right for you:

  • Extend the length of your Bounce Back Loan from six years to 10 years
  • Make interest only payments for six months, with the option to do this up to three times throughout the loan
  • Request a six-month repayment holiday

You can use a single option or several in combination, giving you a great deal of flexibility.

To find out more about this, take a look at the information on the British Business Bank’s website.

Time To Pay Arrangement

Another option is to look at a Time to Pay arrangement (TTP). This is where you get the help of a professional to engage actively with HMRC to discuss the prospect of restructuring the repayments over a longer period of time.

To find out more about this, please take a look at our blog from 2020.

Company Voluntary Arrangement (CVA)

A Company Voluntary Arrangement (CVA) is a legal agreement between an insolvent company and its creditors. It sets out how a company is going to repay the money it owes, how much it will repay and over what period, typically lasting five years.

A CVA can be a useful tool to assist with restructuring the business and enable adjustments to be made to the overheads so that it can return to profitability. It achieves this by spreading out the payments to historical creditors over a longer period and it can also include an element of debt forgiveness too, with the level of repayments being based on affordability. Whilst this is an option to be explored, there are often more preferential options to consider first.

Restructuring & Refinancing

If the Pay As You Grow and TTP options aren’t right for your circumstances, then speaking to an Insolvency Practitioner can help you look at other ways to overcome these issues. We will be able to explore restructuring and refinancing possibilities that will enable you to keep trading. Insolvency is always the last option.

What If You Don’t Pay Your Loan Back?

If the financial difficulties you face simply don’t allow for any of the available options to work, then it may be that you are forced into insolvency by the lender. This is the worst case scenario, and all of the options exist for the key reason that nobody wants a business to fail. The focus is always on how we can work to enable businesses to keep trading.

If you are struggling in any way, then the best thing to do is to get advice. And the earlier you get that advice, the better the outcome usually is.

If you would like to find out more about your options and the best way forward for your business, then contact the team at BLB Advisory and we will be very happy to help.