The aim of this post is to assist our clients who have taken out Bounce Back loans and repayments are soon to commence. It provides some questions for small business owners to consider and pointers to further sources of help. If you have any further questions, you are welcome to contact us.
When will your lender contact you to start BBLS repayments?
Lenders are now starting to contact borrowers who took out bounce back loans in the spring of 2020 to remind them that payments will start becoming due, and to provide information on their Pay As You Grow (PAYG) options, which are:
- Extend the length of the loan from six years to ten years.
- Make interest only payments for six months, with the option to use this up to three times throughout the loan.
- Take a six month repayment holiday. This option is available once during the term of the loan.
Borrowers will be able to use these options either individually or in combination with each other. They also have the option to fully repay their loan early and will face no early repayment charges for doing so.
Lenders are sending these letters in a standard format to borrowers, starting three months before repayments are due to commence.
How can you reduce interest costs on your BBLS loan?
If you can afford to stick to the repayment schedule rather than making interest-only payments, extending the loan or taking a payment holiday, you will pay less interest over the life of the loan. If it makes sense for you to repay the loan early, which you can do without penalty, this will also reduce interest costs.
What repayment option is best for you?
If you will struggle to meet your loan’s scheduled repayments in full from the first month, you should consider carefully which of the options (or combination of options) set out in your lender’s letter is best for you. Lenders will be available to help or provide further explanations for example on the total costs involved – but it will be your decision. We can help provide some cashflow forecasting scenarios based on your Xero data.
Where can I find specific guidance?
Specific guidance will be available from your lender and will contact you three months before payments are due to commence with your options.