Business Bounce Back Loan Update
The Bounce Back Loan (BBL) was a government - backed programme introduced in May 2020 to help struggling businesses deal with the impact of the COVID-19 pandemic.
It allowed businesses to borrow between £2,000 and £50,000 (up to 25% of turnover). With a full government guarantee against the outstanding balance, the take-up was high, over £46 billion was borrowed in total. The scheme closed to new applications on 31 March 2021.
The loans were issued for a period of 6 years, with the government covering the the lender’s interest payments for the first 12 months. From this point the borrower begins to repay the loan and the interest. That means that from May of this year the first borrowers will have become liable for repayments. Of course when the scheme was conceived, it wasn’t expected that some businesses would still not be trading due to COVID-restrictions a year down the line. As a result, ‘Pay as You Grow’ measures were introduced in February. These include options to extend the repayment period, request a repayment holiday and make interest-only payments.
If you took out a BBL for your business then you may be asking yourself if now is the time to pay it back. Well the answer is not as simple as ‘yes’ or ‘no’ and depends on your unique circumstances. If you feel that you are not quite over the hump then it might be best to hang onto the loan for a while and take advantage of some of the ‘Pay as You Grow’ flexibilities. However, you may have taken it out as a precautionary measure and things have gone better than feared and you are now able to repay it.
Early repayment can be made at any stage without incurring penalties. Although in principle a BBL should not affect your business’s ability to obtain finance, some of our clients are indicating that it is having an impact on their creditworthiness with certain lenders.
Professional advice is a prudent move. At GWA we can look at your cash flow, what is coming in and going out of your business, and make reliable suggestions to inform any decision about repayment of your BBL.
For more information, please contact the partner in charge of your affairs or get in touch by phone or our contact form.
