Can You Get A Bounce Back Loan Extension?

Many businesses opted to take advantage of the UK government’s Bounce Back Loan scheme during the COVID-19 pandemic. Though these loans provided welcome respite during a challenging financial landscape, the time has now come to manage your Bounce Back Loan in the post-pandemic world. 

If you are struggling to repay your Bounce Back Loan, there are a number of options that are available, including applying for a Bounce Back Loan extension. We have created this handy guide so that you can feel fully informed when it comes to your options and the implications of extending your loan. 

What Is A Bounce Back Loan?

A Bounce Back Loan was a loan offered by the UK government at the height of the pandemic. These loans enabled small and medium-sized businesses to quickly access the funds they needed at the time, with between £2,000 and £50,000 available depending on business turnover.

Bounce Back Loans were popular as they were guaranteed by the government and immediately came with a 12-month payment holiday. However, once this holiday had expired, businesses were and are required to make regular repayments with a fixed interest rate of 2.5% per year. 

The loans were designed to last for a term of 6 years, although options are available if businesses wish to repay early without incurring fees.

Bounce Back Loan Extension Options

If your business has reached the end of its 12-month payment holiday, repayments will now be due. Though these may have been manageable at first, you may find that you are struggling to make payments as time goes on and other business costs increase as the cost-of-living crisis evolves. 

Aware that many businesses were facing continued challenges, the government implemented a new Pay As You Grow (PAYG) scheme for Bounce Back Loans that allows you to obtain a Bounce Back Loan extension. There are different options available depending on your business requirements, though the most popular is extending your loan term from 6 years to 10 years. Let’s take a closer look at the different options your business has under the PAYG scheme:

1. Extend The Term To 10 Years

Firstly, you can obtain a Bounce Back Loan extension that increases the term to 10 years. This means that you will have an additional 4 years to repay the balance of your loan, which can significantly reduce monthly payments and give your business some breathing space. 

If you wish to extend your loan, it is important to be aware that you will also have to make interest payments during the extension. The interest rate will remain at 2.5% but do note that this will increase the total amount that your business has to repay.

2. Obtain A Six-Month Repayment Holiday

Alternatively, you can request an additional repayment holiday of up to six months. If you choose to do this, you are effectively extending your Bounce Back Loan for six months but do not have to make any payments during this time. Be aware that interest will continue to accumulate during this time and you are only able to request this repayment holiday once, so consider it carefully before jumping to a decision.

3. Make Interest-Only Payments For Six Months

You can also opt to reduce your monthly payments for six months by requesting to make interest-only payments during this time. This can be a sensible choice for those worried about interest accruing during a repayment holiday and is available to your business for three occasions during the length of the loan.

How To Extend A Bounce Back Loan

If you want to extend your Bounce Back Loan or take advantage of some of the other options offered by the PAYG scheme, the first thing you need to do is speak to the lender. Your lender will be able to confirm the different options available to you and talk you through any next steps.

If you are considering getting a Bounce Back Loan extension but are not sure whether it is right for your business, it can be a good idea to seek specialist advice. A qualified insolvency practitioner will be able to talk you through all of your options and help you understand what to do, especially if you are concerned that the PAYG options do not offer enough support to help you repay the loan.

What Happens If I Can’t Repay My Bounce Back Loan?

Because Bounce Back Loans are guaranteed by the government, you are not held personally liable if you cannot repay. Instead, the bank will seek repayment from the government rather than company directors. 

Do note that there are some rules about how funds of a Bounce Back Loan can be used and if these are abused then you may be personally liable for debts. For example, if the company is liquidated or enters administration and an insolvency practitioner finds that the loan has been used to buy personal assets or that creditors have been paid preferentially, then directors will be held personally liable.

Not being able to repay your Bounce Back Loan is a strong indicator that your company is insolvent. While you can liquidate a company with a Bounce Back Loan, you should act swiftly to act in the best interests of creditors and avoid a winding-up petition. 

Speak to the expert team at My Liquidation if you are struggling to pay your Bounce Back Loan. Our insolvency professionals can advise on Bounce Back Loan extension possibilities and help you through the liquidation process if necessary. If liquidation is necessary or preferable, we can help you through the Creditors Voluntary Liquidation process which will allow remaining assets to be swiftly distributed to creditors and the remaining debt to be written off.

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