With the first bounce back loan repayments around the corner, let’s have a look at the options you have to delay or reduce these repayments.
The Government has announced a Pay As You Grow scheme, meaning that you have more options and flexibility now around how you repay your loan.
This is going to provide a lot of business owners with peace of mind, and extra breathing space to get back on track, but be careful of the additional cost.
Here’s our original blog explaining Bounce Back Loans.
What are my options?
1. Extend your loan repayment from 6 to 10 years
The first year was interest and repayment free, so once that year is up, you originally have 5 years left to pay back the loan.
Would it help you to increase this to 10 years?
Your repayments will be less, but your overall costs could be significantly higher (this is the most expensive option we looked at)
2. Make interest only repayment for 6 months
You can use this option up to 3 times throughout the lifetime of the loan
Each month you will only repay the original loan, and not make any interest payments.
This will increase your overall interest charges, but does the additional cost balance out with the extra breathing space?
3. Take a repayment holiday for 6 months
This means no payments at all for 6 months
You could also extend the loan term for this 6 months.
The impact of this will be that both your interest and your repayments will then be more each month, to make up for the missing 6 months.
What does it look like?
Here’s a snapshot of the options available on a £50,000 bounce back loan with Lloyds bank plc (just for illustrative purposes)
In this example, extending the loan term by 10 years creates a huge increase in costs of £2,500, so be careful.
What should I do now?
- The most crucial next step is to look at your financial plan and cashflow forecast, and see what you can afford.
- Try out different scenarios – what if lockdown is extended, what if I lose a contract, what if I make a team member redundant, etc.
- Book a call to create your Action Plan for the next 12 months, we can help you to identify where you want to get to in the next year, and to build a plan to reach this goal.
- We can also support you with finance applications.
We’re here to support you!