Struggling to Pay Bounce Back Loan
The Scheme is intended to be a temporary response to the unprecedented challenges to businesses as a result of coronavirus (COVID-19). The Scheme will initially open until 4 November 2020, with the government retaining the right to extend this.
Businesses can apply for loans which are 100% guaranteed by the Government, and where the major advantage is that there will be no repayments for the first 12 months.
Applicants are required to self-declare they meet the eligibility criteria for the Scheme. Applications from eligible borrowers will be subject to customer fraud, Anti-Money Laundering (AML) and Know Your Customer (KYC) checks.
The loans have a fixed term of six years, but the interest rate after the first year is just 2.5%, and the loans can be repaid early without penalty.
The lowest loan amount available is £2,000 and the maximum loan amount is the lower of £50,000 and 25% of the business’s annual turnover.
To be eligible, businesses need to have been established prior to March 1 2020 and must have been adversely affected by coronavirus.
Paying back the Bounce Back Loan
The burden will be lifted for businesses who took out a Bounce Back Loan through a new Pay as You Grow flexible repayment system. This will provide flexibility for firms repaying a Bounce Back Loan.
This includes extending the length of the loan from six years to ten. Interest-only periods of up to six months and payment holidays will also be available to businesses.
The government also intends to give Coronavirus Business Interruption Loan Scheme lenders the ability to extend the length of loans from a maximum of six years to ten years if it will help businesses to repay the loan.