21 Jul 2022

How to manage Bounce Back Loan repayments

Bounce Back Loans (BBLs) helped hundreds of companies through a very difficult situation throughout the pandemic. Indeed, the scheme provided 1.5 million loans, all of which totalled to £47 billion for businesses across the UK.

It enabled businesses to access funds quickly during the rapid economic downturn at the beginning of the pandemic, with the promise of low interest rate repayments over an extended period. The scheme took a huge weight from many business owners’ shoulders.

However, one issue we are now seeing with the BBLs is that many businesses used this loan as a short-term fix without thinking about the longer-term implications. Of course, this is hardly surprising with so many taking out the loan when they were in survival mode, and the money served a purpose of getting them through.

Now, especially with a continued turbulent economy, many are struggling to find the means to be able to pay it back.

Usually when a business takes out a loan, it is used to invest in other assets such as technology and tools – all items that will, in the long-term, generate more revenue. Of course, with the Bounce Back Loan, it wasn’t a revenue generating tool, it was a survival tool. Now, businesses – both employers and employees – are having to work harder than ever to make money but are getting less in return.

There’s a lot of anxiety about having to ‘over trade’ to be able to meet the repayment terms. If businesses do not make the money necessary, other areas of the business will begin to suffer. It’s a balancing act for employers, and one which is certainly taking its toll.

Additionally, the banks are currently looking very unfavourably at those businesses who have taken out Bounce Back Loans, with the inference that at some point they were in trouble. For some, it’s becoming clear that the weight that was taken from them at the start of the pandemic is being piled back on.

So, how can businesses support themselves with BBL repayments?

Extend the payment term
Most businesses will have taken out the loan with the expectation of paying it back in six years. If needed, this payment term can be extended to 10 years without a change to the rate of the interest being charged.

Of course, if you do look to extend the payment term, ensure to control what you can by doing regular cashflow forecasts. Have a granular understanding of your incomings and outgoings and look closely and what variables over the next three, six and 12 months may impact both your ability to pay back the loan and to keep running your business effectively.

Talk to your other creditors
It’s very likely that you may have other debts as a business that you are paying off in one guise or another. Ensure to have open conversations with those creditors/lenders to explore whether you can arrange new payment plans with them, helping to reduce monthly outgoings. While this may only be able to be a short-term solution, it’s certainly better than nothing at all.

Request a six-month holiday from payments
If you are in a tight spot, you can request a payment holiday form your creditor. If granted, you’ll make interest only repayments and this could be a way to substantially cut down on monthly outgoings for a short period of time, helping you to get your ducks in a row for the rest of this year.

While it may be a worrying time for you and your business if you’re struggling to keep up with BBL repayments, there are steps you can take to help ease those financial pressures, even just for a short period. If you need advice at any point or would like support in looking at the options available to you, ensure to engage with a professional who can help you through it. The friendly team at Monahans are here for you whenever you may need us.

Clare Bowen