Banks and other lenders are now starting to contact borrowers who took out bounce back loans in the spring of 2020 to remind them that payments will start becoming due, and to provide information on their Pay As You Grow (PAYG) options, which are:

• Extend the length of the loan from six years to ten years.
• Make interest only payments for six months, with the option to use this up to three times throughout the loan.
• Take a six-month repayment holiday. This option is available once during the term of the loan.

They also have the option to fully repay their loan early and will face no early repayment charges for doing so. Businesses which feel that they will struggle to repay the loan need to consider making use of any of the PAYG options.

You may wish to take into account that:
Taking interest or capital payment holidays, without extending the term of the loan, will increase the amount of your monthly repayments afterwards.

Extension of the loan will reduce your monthly payments because you are paying back the capital amount over a longer period; but the fact you are paying for longer will increase the overall cost of the loan. You should be confident that your business will stay trading for long enough to pay off the loan.

You will want to be confident that as your business recovers and its revenues grow, you will be able to afford the revised payments as they become due, along with other expenses. Cash flow forecasts for your business may be a helpful tool to support your thinking.

If your business has already ceased trading or does not have a route to a viable future, then it may not be appropriate to use the PAYG options. Your business is still liable for the loan, so in this situation, your loan would move directly into lender collections and recoveries process.

Professional advisers and accountants can help you to better understand the viability of your business, and its forecast cash flows, which may be important in forming your decision and supporting your discussion with your lender.  They will want to understand how your business and its prospects have evolved from the information you gave to the lender at the time you took out your BBLS loan.  Contact us if you need help with planning for your loan commitments and generally considering the viability of your business post-pandemic.

Contact us if you need help with planning for your loan commitments and generally considering the viability of your business post-pandemic.

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