As part of the governments scheme to aid businesses during the COVID-19 pandemic, Bounce Back Loans (BBL) were offered through 29 British Business Bank accredited lenders. For the first 12 months any interest on these loans was paid for by the government alongside a 12 month payment free period.
As we are now nearing 13 months since these loans were issued, businesses are having to look at what choices are open to them with regards to these loans. Options available are as follows:
- Repay on the original agreed terms
- Repay full/part lump sum on the loans with regular payments thereafter
- Move to interest-only repayments for a period of 6 months (this option can be used up to 3 times).
- Pause repayments entirely for up to six months using a repayment holiday. This option is available once over the life of the loan.
- Extend the length of their loans from six to ten years (reducing monthly repayments by almost half).
Lenders will be contacting businesses with these loans to explain the options available and how to potentially amend their BBL.
If any amendments are taken for payment holidays, interest only payments or extensions, there will be no credit reference agency impact, provided there are no arrears currently outstanding. However, if additional borrowing is required, and one of these options has been taken, it may affect any future creditworthiness assessments.
If you want to apply for the extension from 6 years to 10, you can do this at anytime throughout the period of the loan. If you also have the capacity to repay the loan early, there will be no early repayment charges.
If you are looking to take advantage of the interest only repayments, repayment holidays or extension we would advise you to speak to your lender to apply for this as soon as you can to ensure you can keep up with payments and you do not default on the loan.
Use of any of these amendments to the loan will result in the total amount owed increasing from the original amount agreed upon approval of the loan. All defaults on the loan will be treated like any other type of loan and can affect the credit rating of the business and can lead to compulsory strike off or bankruptcy orders.
If you are unsure about whether you should use one or some of these options, please give us a call and we will be able to look into the company’s future cashflow and explain, based on the company’s figures, which option/s would be best suited.