Can’t pay your Bounce Back Loan? Help is at hand…
If you’ve taken advantage of the Coronavirus Business Interruption Loan Scheme – more commonly known as a Bounce Back Loan – you might be facing the added pressure of having to start repayments. But what if you can’t pay your Bounce Back Loan?
While this article explains what you can do to ensure the survival (and future prosperity) of your business, outlining the schemes available and suggesting other sources of finance, the best thing you can do is seek professional help.
Later in this article, we’ll look at two Government schemes you could use if you can’t pay your Bounce Back Loan. But first, these are some immediate steps you can take that could ease the stress of making those payments.
Your accountant or business rescue expert will be able to guide you. As experts, they’ll have helped hundreds of businesses survive a period of financial distress and come out the other side, leaner and stronger.
With their help, you should update your cash-flow forecast. This will enable you to pinpoint exactly how much funding you’ll need for the next three, six and 12-month periods.
This forecast should include details of the steps you’re taking to make your business viable, including cost-cutting measures.
Set the scene by detailing what’s happening in your particular sector, explaining why – even though you can’t pay your Bounce Back Loan now – you are well-placed to survive and prosper going forward.
Speak to your bank
It’s important that you talk to your bank and other lenders you’ve used. If you’ve updated your cash-flow forecast and can show you have a viable business, then the chances of you securing bank finance will be much improved. They might be able to help with extended overdraft facilities or a loan.
This allows you to borrow money against the value of the invoices owed to you by your customers.
If you’re not already aware of the options, your advisor will explain the differences between invoice financing and invoice discounting.
With the right arrangement you’ll receive up to 85% of the value of the invoices immediately, and the remaining amount (minus the finance charge) when the customer pays the invoice.
To find out more about invoice financing, read our article showing how this solution can solve your cash-flow problems.
Approach an investor
If you’re prepared to give up some of the equity in your business, then you could attract finance from an ‘angel’ investor. Your business advisor can guide you through the process and help you find ‘the perfect match’.
You can find out more at the UK Business Angels Association website.
Apart from the obvious – the cash – there are other advantages of teaming up with a business angel. They will be business-savvy (having ‘been there and done that’) and their experience is sure to be invaluable to you.
Ideally, you’ll partner with an angel who knows your sector and who will bring fresh ideas, insight and energy to your business.
These Government schemes are designed to help businesses who have a bright future but can’t pay their Bounce Back Loan due to their current circumstances.
Pay As You Grow
If you have a Bounce Back Loan you now have more options over how you pay it back, through the Pay As You Grow scheme.
Pay as You Grow cash is available to over 1.4 million businesses, which collectively borrowed nearly £45 billion through the Bounce Back Loan Scheme.
The new repayment options mean:
- you can request a six-month repayment ‘holiday’ once during the term of the loan.
- you can extend the length of the loan from six years to 10, at the same fixed interest rate of 2.5%.
- you can make interest-only payments for six months – and you can do this up to three times throughout the term of the loan.
Even if you can’t pay your Bounce Back Loan immediately, given that the longer you extend the loan the more it will cost you, you should still pay it back at the earliest opportunity. But it’s good to know you can do this without any repayment fees or penalties.
Another positive is that you can use a combination of these options at the same time.
Self employment income support scheme (SEISS)
There’s help available for self-employed people, too. The amount of support available for under SEISS depends on how much your turnover has been affected by the pandemic.
Those whose turnover has reduced by at least 30%, can apply for a grant of 80% of three months’ average trading profits, capped at £7,500.
Those whose turnover has been reduced by less than 30% can apply for a grant of 30% of three months’ average trading profits, capped at £2,850. Inevitably the turnover test, which is new for the fifth grant, has generated a number of questions.
Again, with the help of a business rescue expert you’ll be able to maximise the amount you’ll be able to claim
If you’ve exhausted the options outlined above without success (your business rescue specialist will be able to suggest some other avenues too), then you may have to consider an insolvency process.
Remember, insolvency doesn’t necessarily mean the end of your business. In fact, the opposite is frequently true – an insolvency process brings a new beginning.
A company administration, as an example, is essentially a rescue process that helps creditors recover their money and helps you plan for the future of your company, giving you a fresh start. A business rescue expert will explain all the options available to you when it comes to administration and insolvency, and help you choose the right path for your unique set of circumstances.
Remember that, as you start this process, any loan you’ve raised through CBILS will be included in your debts and potentially written-off.
Recent events have left many businesses in a precarious position. If yours is one of them, then the most important thing you can do is to seek professional help. It’s important that you stay positive and remember that you do have options.
Using the services of a business rescue specialist will help you pinpoint
the options that will best work for you, enabling you to flourish. Our team of licensed insolvency practitioners and business rescue experts can explain all your options if you can’t pay back a Bounce Back Loan, and put in place a plan for your future. Call us on 01455 555444 or email [email protected]