If you can’t pay a bounce back loan, contact your lender as soon as possible as you will offer you the option to postpone repayments for six months with a payment holiday.
The Bounce Back Loan Scheme was introduced to provide financial support to businesses affected by the COVID-19 pandemic, and the terms usually include a fixed low-interest rate and a payment-free period.
Defaulting on the loan could lead to damage to your credit score, increased interest rates, and potential legal action from the lender.
In addition, because the loan was backed by the government, defaulting on repayment could also lead to complications with future applications for government financial support.
It’s crucial to engage in open communication with the lender to discuss any difficulties you’re facing and explore options like renegotiation or restructuring the loan to avoid the negative ramifications of a default.
What to do if you can’t afford to repay a Bounce Back Loan
Limited companies facing difficulties in repaying their Bounce Back Loans should be proactive in addressing the situation. First and foremost, it’s essential to communicate early with the lender, detailing the company’s financial struggles and seeking potential arrangements or renegotiations.
Many financial institutions may be amenable to restructuring the loan, extending the repayment term, or providing a period of interest-only payments. Additionally, companies should assess their financial operations, cutting non-essential costs and optimizing cash flow. It may also be worth considering external advice from financial advisors or insolvency professionals who can provide tailored solutions.
While the business Bounce Back Loan scheme was designed to provide relief during unprecedented times, companies must recognise the gravity of the liability and take swift action to navigate repayment challenges.
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With over three decades of experience in the business and turnaround sector, Steve Jones is one of the founders of Business Insolvency Helpline. With specialist knowledge of Insolvency, Liquidations, Administration, Pre-packs, CVA, MVL, Restructuring Advice and Company investment.