What you need to know if this means you

Several businesses who took out bounce back loans last year will be having a similar sinking feeling as the 12 month, payment free holiday period some of them took advantage of has now come to an end. 

New research commissioned by lenders who supplied bounce back loans under the scheme found that out of 500 respondents, 83% had asked for or used all available payment holidays they were entitled to. 

The lenders also revealed that the most popular request they were getting from borrowers was to add another year long interest free payment deferral. 

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When the bounce back scheme launched in 2020, companies who borrowed were originally given a year free  from repayments and also interest free as the government paid the annual 2.5% interest incurred. 

Now this period has ended and many are finding it difficult to repay these arrears. 

Under the terms of the loan borrowers could request an additional six month interest and repayment holiday and a further three six month interest free holiday periods. 

However they would still need to repay the interest which would accrue over this period which could still be a large burden for many of them. 

Richard Stevens, chief executive of Momenta who facilitated the research said: “While the government and lenders made available a number of unusually generous repayment options there’s a specific cohort of small and medium sized enterprises (SMEs) who are in the mire.

“Of these businesses struggling to repay, the majority have asked for an extension of the interest free payment holidays for an additional year beyond what has already been offered. 

“Of concern is that businesses struggling to repay have requested this complete repayment moratorium over schemes such as Pay As You Grow which is already in place to ease the repayment process.”

He added: “There’s immense financial pressure on business owners from all angles – not least from the slow recovery of sales and the end of the furlough scheme, but the shortage of additional labour due to the onset of Brexit compounded with the increasing costs of certain raw materials and supply shortages. 

“From our perspective, it’s these combined reasons which have required additional skilled collections professionals to empathise and negotiate repayment plans, as well as compliance and credit analyst team members to review lending processes.”

There is still time for directors to act – but not much

Businesses struggling to repay their bounce back loan arrears need to consider their options and then take action according to professional advice, says Chris Horner, Insolvency Director with BusinessRescueExpert.co.uk.

He said: “The bounce back loan scheme is one of the biggest lending ventures we’ve seen in recent years. 

“Over £46 billion was borrowed by over 1.5 million businesses across every UK nation, region and industrial sector. We spent the summer detailing most of it.

“But not every business has seen the same recovery. Many have had different restrictions imposed on them through no fault of their own and been unable to trade at the same volume or pace. 

“This can make an already tough time even more stressful for directors and business owners who are already juggling with the end of the furlough scheme and other rule changes that could negatively impact them. 

“The end of the holiday period for bounce back loan repayments could be critical for a company that doesn’t have a plan in place to handle their liabilities as they come due. 

“Getting professional advice right now could be the difference between them trading over Christmas and the new year or not.”

While everybody can be wise after a bad event, business owners and directors of companies with financial worries have the chance to be wise before one – but only if they act now and get in touch with us. 

Our free initial consultation is as popular as you’d imagine right now but we still guarantee that one of our expert advisors will listen to your situation and be able to come up with a range of effective and efficient solutions based on the unique circumstances the business faces.

Whether restructuring might be the best option or a CVA or if closing the business down is the logical way to go – even if you have an outstanding bounce back loan – we’ll tell you straight and work with you to complete the process. 

The first and most important decision – arranging professional advice – is yours.