Bounce Back Loans
One year on, time to start repayments
The bounce-back loans were introduced a year ago so the 12 months payment holiday is coming to an end. The government has previously announced the Pay as You Grow (PAYG) scheme, which allows the payments to be deferred/extended. The options are:
- Request an extension to ten years at the same fixed rate of interest
- Reduce the monthly payments for six months by paying interest only, this can be requested three time during the term of the loan
- Take a repayment holiday of six months (interest and capital) once during the term.
The right to these options is automatic and you should login to your banking portal and request the option that suits you, which will only be available once repayment is due and not before. You can use a combination of the above, but you need to be aware that all options will increase the overall interest you will pay.
WILL MY BANK BE CONCERNED IF I PAY BACK THE FULL AMOUNT EARLY?
Banks will not have any concerns if you took the loan, but then didn’t need it and now wish to repay the balance in full.
WHAT IF I BORROWED MORE THAN I WAS ENTITLED TO?
There was a limit of 25% of turnover, which you will have certified when you borrowed the funds. If you borrowed more, say 40% it is probably worth approaching your bank early and explaining an error was made and that you would like to repay the excess loan.
WHAT HAPPENS IF THE COMPANY DEFAULTS ON LOAN REPAYMENTS?
Your lender has a government guarantee for the funds in the event of default, however, under the terms of that guarantee they have to seek recovery just as with any other loan. It is therefore highly likely that if the funds have been used for an incorrect purpose, such as for director pension contributions, salary, loan account repayments that these will be investigated and recovery sought as this could well be misuse of the funds. Under the terms of the application form completed you have agreed they are for the betterment of the business. If you are in this situation you should consider taking advice.
Only when the normal recovery routes have been exhausted will the government guarantee cover the bank for their loss, they need to demonstrate they have followed their normal procedures.
Contact Haslers for more information.