Businesses urged to check options as bounce back loan repayments due
Companies can choose to freeze payments or pay only the interest on their loans for some months
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Your support makes all the difference.Businesses are being urged to check their options as the first repayments become due on the Coronavirus support loans that they took more than a year ago.
Payments will be due this week for many of the early adopters of the Government’s Bounce Back Loans, which launched in May last year.
Companies were given 12 months where the Government picked up the 2.5% interest charged on the loans of up to £50,000.
However now, 13 months later, some firms will be due to start making payments to their lenders.
Richard Bearman, the managing director for small business lending at the British Business Bank – which has been overseeing the scheme, said that business should check what options they have.
“The Bounce Back Loan Pay As You Grow scheme offers flexibility to borrowers in managing their repayments more effectively, and businesses may access its features, such as increasing term length and reducing monthly payments, throughout the term of their loans,” he said.
“We encourage borrowers to contact lenders early in the three months leading up to their first repayment if these options are of immediate interest.”
The available options include extending the loan period from six to 10 years, pausing interest payments and loan repayments for one six month period and paying only interest for three six-month periods.
More than £46.5 billion was lent by the UK’s banks to small businesses which needed support during the Covid-19 pandemic.
Nearly 700,000 businesses pounced early and took loans within the first month of its launch last May. Many of these firms will now be due to pay back in the coming weeks.
A survey published earlier this week showed that around 22% of small companies aim to pay back the full loan within the next 12 months. However 15% said they will take a full decade to repay – the maximum allowed under the Government-backed scheme.
Around one in 100 said they do not ever expect to pay back the loans.
Official data on repayments have not yet been gathered, but over time as payments start coming in the Government will have a better picture of how much money will be paid back.
If any of the 1.5 million businesses who took out a bounce back loan do not repay it, the Government has promised to repay the lenders. Some worry that this might run into tens of billions of pounds.