Can You Get A Bounce Back Loan Repayment Extension? Here Is How!

The government’s Bounce Back Loan Scheme was a lifeline for many businesses during the COVID-19 pandemic. However, as the repayment period approaches, many business owners are wondering if an extension is possible.

The good news is, yes, an extension is possible thanks to the government’s Bounce Back Loan Repayment Extension under the Pay As You Grow (PAYG) scheme. This scheme offers various options, including extending the repayment term, taking a temporary repayment holiday, or making interest-only payments. 

Keep reading to explore these options and learn how they can help your business.

What do we mean by the Bounce Back Loan Scheme?

The Bounce Back Loan Scheme was launched at the peak of the Coronavirus pandemic. It offered loans to businesses facing challenges due to the pandemic, with amounts of up to £50,000 based on a company’s income. 

Additionally, the government guaranteed these loans which ultimately reduced the risk for borrowers compared to other business loan options. But still, the Loans were still loans with an obligation for repayment. 

Companies were required to make sincere efforts to repay their loans, and lenders were expected to explore all avenues of collection before involving the government.

Repaying a Bounce Back Loan doesn’t begin right away. After receiving the loan, there’s a 12-month repayment holiday, so you won’t need to make any payments during this period.

However, it’s really good to consider making repayments sooner, as this lowers your overall interest. 

If you’re unable to repay anything even after the 12-month period,  you can take the help of some tools available to ease your repayment process.

Is it possible to extend the repayment of a Bounce Back Loan?

Yes, it is possible to extend the repayment of a Bounce Back Loan. You can apply for a repayment extension under a few circumstances.

All BBL extensions will carry a fixed interest rate of 2.5% throughout the loan term. 

Thus, opting for an extension will result in an increase in the total interest paid over the borrowing period. That’s because the interest will accumulate over 10 years instead of 6 years, resulting in higher overall repayments. 

Depending on the loan amount, extending could lead to paying thousands more pounds in total. In most cases, extending the loan term can be greatly beneficial for cash flow. 

With payments spread over 10 years instead of 6, monthly repayments will nearly halve, offering significant relief. 

This variance could have a huge impact on companies, giving them the ability to manage repayments more affordable.

How long can I repay my Bounce Back Loan?

Bounce Back Loans (BBL) typically come with a repayment period of 6 years, allowing borrowers six years to fulfil their monthly instalments. During the initial 12 months of the loan, no repayments are due. 

Before initiating the first payment, you have the opportunity to extend the loan duration to 10 years, providing greater flexibility in managing repayments.

Additionally, borrowers can opt for interest-only repayments for six months, with the option to do so up to three times. Also, you have the option to pause repayments for six months, though this can only be done once throughout the loan term. 

These options offer borrowers various opportunities to adjust their repayment schedules based on their financial circumstances.

How to Extend Your Bounce Back Loan? [Explore The Effective Options!]

If your business has completed the 12-month repayment holiday, payments will become due. While it is manageable initially, you might find it challenging to keep up as time passes, especially with rising business costs amid the evolving cost-of-living crisis.

Well the solutions could be facilitated through the Pay As You Grow (PAYG) scheme. 

Wondering what it is?

In general terms, the Pay As You Grow (PAYG) scheme is a financial initiative introduced by the UK government to provide additional flexibility to businesses that have taken out Bounce Back Loans (BBLs). 

There are various options available based on your business needs, with extending the loan term from 6 years to 10 years being the most favoured. Let’s dive deeper into the different choices your business has under this PAYG scheme:

1. Extend The Term To 10 Years

This option under the Pay As You Grow (PAYG) scheme allows businesses struggling with Bounce Back Loan repayments to extend the repayment period from the standard 6 years to 10 years. 

That means you’ll have an extra 4 years to settle the loan balance, which could notably lower monthly payments and provide your business with some much-needed breathing space.

If you opt for a loan extension, it’s crucial to note that you’ll be required to make interest payments during the extension period. The interest rate stays at 2.5%, but it’s essential to understand that this will raise the overall repayment amount for your business.

2. Request For A Six-Month Repayment Holiday

This PAYG option offers short-term relief by temporarily pausing your Bounce Back Loan repayments for six months. This means you won’t have to make any payments towards the principal or interest during that period.

This can be a lifesaver if your business is facing unforeseen financial difficulties and needs immediate cash flow relief.

However, remember that interest continues to accrue during the holiday, so you’ll owe a larger sum when repayments resume. Additionally, while not an automatic consequence, missing payments could potentially impact your credit rating in the long run. So, be aware of this before jumping to a decision

3. Make Interest-Only Payments For Six Months

This PAYG option allows you to temporarily reduce your monthly payments by only paying the interest on your Bounce Back Loan for a period of six months. This can be beneficial if you’re experiencing cash flow challenges but can still manage the interest payments. 

This is how it works:

Imagine your original monthly repayment was £100, with £80 going towards the principal amount and £20 covering the interest. 

By choosing to make interest-only payments, you’d only pay the £20 interest, significantly lowering your monthly payment to £20.

 

What happens if I extend my Bounce Back Loan?

If you choose to extend your Bounce Back Loan, you will be repaying back monthly over a 10-year period instead of 6 years.

Paying over 10 years may be better for your business, as it will bring the monthly repayments down, to almost half of what they would be for a 6-year term repayment period.

• Extending your Bounce Back Loan provides your business with more manageable monthly repayment amounts, allowing you to better allocate funds for other operational expenses or investments. 

• It also eases the immediate financial burden and provides greater flexibility in managing cash flow over an extended period.

However, it’s essential to carefully consider the implications of extending the loan term and assess how it aligns with your business’s long-term financial strategy and sustainability.

Will my Bounce Back Loan ever be written off?

No, your Bounce Back Loan won’t be written off unless your company goes through a formal process called “liquidation”. This means the company would cease to operate and its assets would be sold to repay debts, including the Bounce Back Loan.

Remember, the Bounce Back Loan is a loan, not a grant, and you are ultimately responsible for repaying it.

If you’re struggling to repay your Bounce Back Loan, as mentioned there are options available under the Pay As You Grow (PAYG) scheme, which can help by:

• Extending the repayment period to lower monthly payments.
• Taking a temporary repayment holiday.
• Making interest-only payments for a limited time.

What to do if I can’t repay my Bounce Back Loan?

If you find yourself unable to repay your Bounce Back Loan, even with assistance from the PAYG scheme, it’s likely that your company is insolvent.

In this scenario, it’s crucial to act promptly to prevent creditors from taking action such as submitting a winding-up petition. In such circumstances, opting for liquidation is likely the most suitable course of action.

Liquidating Your Company With The Bank Loan

When closing down a company with a Bounce Back Loan or any insolvent company, a common approach is through a Creditors’ Voluntary Liquidation (CVL). This is a formal process where directors voluntarily shut down their company with the help of an insolvency practitioner.

Here’s how it works: 

Directors choose their own insolvency practitioner, who becomes the liquidator. The liquidator identifies company assets, liabilities, and communicates with everyone involved. 

They sell off assets, settle debts, and distribute any remaining money to creditors. Once this is done, the company officially closes.

The CVL procedure offers legal protections too. While it’s happening, creditors can’t take legal action against the company. Any remaining debts, including the Bounce Back Loan, might be written off. 

Directors usually aren’t personally responsible for these debts, unless they give personal guarantees.

Overall, a CVL is a straightforward and legally protected way to close down a company with a Bounce Back Loan, ensuring a fair process for creditors and directors alike.

Or, Vanguard Insolvency Can Help You Out! 

If your company is facing difficulties repaying its Bounce Back Loan, rely on Vanguard Insolvency for assistance. With long years of experience in resolving financial issues for companies, we can offer the same support to you. 

Wrapping Up!

Lastly, it’s worth it to note that the availability of a Bounce Back Loan repayment extension can be possible but depends on your circumstances and the policies set by your lender. In certain situations, it’s crucial to explore your options carefully. 

For professional advice and assistance, we recommend you consult with experts from our Vanguard Insolvency. Their guidance can help navigate the complexities of loan extensions and provide clarity on the best course of action for your financial situation.

Remember, seeking professional advice ensures you make informed decisions regarding your Bounce Back Loan repayment.