Struggling with bounce back loan repayments? Here’s your complete guide to navigating BBLS debt 

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The bounce back loan Scheme (BBLS) was introduced by the UK government in May 2020 as part of a broader effort to support businesses affected by the economic impact of the COVID-19 pandemic. Designed to provide quick and accessible financial relief, the BB loan scheme or BBLS offered small and medium-sized enterprises (SMEs) an opportunity to borrow between £2,000 and up to 25% of their turnover, with a maximum loan of £50,000. Unlike traditional loans, the bounce back loan came with favourable terms, such as a low fixed interest rate of 2.5% and a one-year payment holiday, making it an attractive option for many businesses struggling with cash flow during the crisis.

The primary aim of the BBLS was to help businesses “bounce back” from the immediate financial difficulties caused by the pandemic. By providing fast and low-interest loans, the scheme enabled companies to cover essential costs, maintain operations, and protect jobs during an uncertain period. However, as businesses begin to recover, some are finding it challenging to meet the repayment obligations of their bounce back loans.

This article is tailored for business owners who have taken out a bounce back loan but are now facing difficulties in repaying the debt. Whether you’re exploring options for managing your repayments, seeking clarity on what the loan terms entail, or considering insolvency solutions like Creditors Voluntary Liquidation or CVL, this guide will provide a comprehensive overview of the BBLS, including its benefits, application process, eligibility criteria, and what steps you can take if your business is unable to repay the loan in full.

We will delve into what a bounce back loan is, how bouncing back loans can help your business, and the various options available to you if repayment becomes a challenge. Understanding these aspects is crucial, especially if your company is experiencing financial stress, as there are paths you can take to mitigate the impact and navigate the complex landscape of business debt and insolvency.

Throughout this guide, we will also explore the details of the BBL payment plan, including tax implications, interest rates, and borrower obligations towards bounce back loan lenders, alongside potential solutions for businesses that are unable to meet their bounce back loan commitments. Whether you’re weighing the benefits of a bounce back loan or already grappling with the realities of repayment, this article aims to equip you with the knowledge needed to make informed decisions for your business’s financial future.

1. Understanding the bounce back loan (BBLS or BBL loan)

As already said, the bounce back loan scheme (BBLS) was a lifeline for many UK businesses during the economic downturn caused by the COVID-19 pandemic. It provided a straightforward way for small and medium-sized enterprises (SMEs) to access funding quickly, with the aim of helping them navigate through immediate cash flow challenges. This section will cover what a bounce back loan is, its meaning and benefits, the different options available, and how the loan works, helping you understand the essentials of the BBLS and how it can aid your business.

bounce back loan - Money leverage and inflation balance financial concept

1.1. What is a bounce back loan or what is BBLS loan meaning?

A bounce back loan is a government-backed loan scheme introduced in the UK to support SMEs affected by the pandemic. The scheme allowed businesses to borrow between £2,000 and 25% of their annual turnover, up to a maximum of £50,000. The primary purpose of the BBLS was to provide quick, accessible financial support with minimal bureaucratic hurdles, allowing companies to maintain liquidity during a period of unprecedented economic uncertainty.

Bounce back loan meaning and how it can help your business. 

The term “bounce back loan” reflects the scheme’s goal of helping businesses “bounce back” from the immediate financial shocks of the pandemic. For many companies, this funding was critical in covering day-to-day operating costs, such as payroll, rent, and utilities, thereby stabilising their financial position during a tumultuous period. The BBLS was particularly beneficial due to its favourable terms, including a 12-month interest-free period, low fixed interest rates, and no fees for early repayment, making it a flexible and accessible option for businesses in need.

1.2. Types of business bounce back loans available

While the core structure of the BBLS was standardised across all lenders, there were slight variations in how the loans were administered depending on the lender. Some banks and financial institutions offered additional features such as repayment holidays or more tailored customer service options. Although the BBLS was a universal scheme, choosing the right bounce back loan lenders could influence the ease and speed of accessing funds, as well as the ongoing support available during the loan’s tenure.

1.3. How does the bounce back loan work?

How the BBLS loan works? The bounce back loan scheme was designed to be as simple and accessible as possible. The loans are 100% government-backed, meaning that the government guarantees the lender that they will cover the loan in the event of default. This guarantee enabled banks to offer the loans without requiring extensive credit checks or personal guarantees, significantly speeding up the approval process.

BBL interest rate and repayment terms. The interest rate on a bounce back loan is fixed at 2.5% per annum after the initial 12-month interest-free period. Repayment terms are generally set over six years, but borrowers have the flexibility to extend the term up to ten years under the pay as you grow options introduced by the government. These options include:

  • Extending the loan term. Businesses can extend the loan term from six years to ten years, thereby reducing monthly repayments.
  • Interest-only payments. For a period of up to six months, businesses can opt to pay only the interest, which can be utilised up to three times during the loan term.
  • Payment holiday. A single six-month payment holiday is available, giving businesses some breathing space if they encounter temporary cash flow difficulties.

Taxes, obligations, and responsibilities of BBLS borrowers. Although the BBLS provided much-needed relief, businesses are still required to meet their tax obligations, and the loan itself must be repaid according to the terms agreed upon with the lender. It’s essential for businesses to understand that failure to repay the bounce back loan could result in legal consequences, and the business remains liable for the debt even if it is unable to fully recover financially.

Understanding how the bounce back loan works and knowing the various repayment options available can help business owners make informed decisions. For companies struggling to meet their bounce back loan obligations, exploring additional support options, such as restructuring the loan or seeking professional insolvency advice, may be necessary. The next section will dive deeper into the eligibility criteria and application process for those considering or currently managing a bounce back loan.

2. Bounce back loans help for UK companies - eligibility and application process

The bounce back loan scheme (BBLS) was designed to offer fast and accessible financial support to small and medium-sized enterprises (SMEs) struggling due to the pandemic. To make the most of this opportunity, it was crucial for businesses to understand the eligibility requirements and the application process. This section provides a detailed guide on who could apply for a bounce back loan, the steps involved in the application process, and how to select the right lender.

bounce back loan - credit, investment or fundraising financial concept

Who could apply for a bounce back loan? The BBLS was open to most UK-based businesses, including sole traders, partnerships, and limited companies, provided they met the eligibility criteria set out by the government. The key conditions for eligibility included:

  • Business location: the business had to be based and operate in the UK.
  • Established before March 2020: only businesses that were established before 1 March 2020 were eligible for the loan.
  • Impact from COVID-19: the business must have been adversely affected by the COVID-19 pandemic, such as experiencing a loss of revenue or disruptions to operations.
  • No existing state aid exceeding limits: businesses could not apply if receiving the loan would breach state aid limits, particularly relevant for those in agriculture or fisheries.
  • Not already using other schemes: applicants could not be participating in other coronavirus business support schemes, such as the Coronavirus Business Interruption Loan Scheme (CBILS), unless they agreed to transfer the loan to the BBLS.
  • No exclusion criteria: certain businesses were excluded, such as banks, insurers (excluding insurance brokers), public-sector bodies, and state-funded schools.

The BBLS aimed to be as inclusive as possible, providing vital support across a wide range of industries, with minimal barriers to access.

Step-by-step guide to applying for a BBLS loan

The application process for a bounce back loan was designed to be quick and straightforward, with minimal documentation required to ensure businesses could receive funds rapidly. Here’s how the process typically worked:

  • Choose a lender. Start by selecting an approved bounce back loan lender. Many high street banks and financial institutions were accredited to offer BBLS, including major names such as Barclays, HSBC, Lloyds, and NatWest. It was advisable to first approach the bank where your business already held an account, as this often streamlined the application process.
  • Complete the online application. The application was usually completed online through the lender’s website. The form was straightforward, asking for basic information about the business, such as turnover, incorporation date, and intended loan amount (up to 25% of turnover, capped at £50,000).
  • Self-certification. Applicants were required to self-certify that their business met the BBLS eligibility criteria. This self-certification was a key feature that simplified and sped up the application process, as it reduced the need for extensive checks and documentation.
  • Approval and agreement. Once the application was submitted, most businesses received a decision within 24 to 72 hours. If approved, the business would then enter into a loan agreement with the lender, outlining the terms, repayment schedule, and any specific conditions.
  • Receiving funds. After signing the loan agreement, the funds were typically deposited directly into the business’s bank account within a few days, allowing companies to access the much-needed capital quickly.

Bounce back loan lenders and how to choose the right one

While the BBLS was a government-backed scheme with standardised terms across all lenders, choosing the right lender could still impact the overall experience. Key considerations when selecting a lender included:

  • Existing banking relationship. Applying through a bank where the business already had an account often led to a faster and smoother process.
  • Application speed. Some lenders processed applications more quickly than others, so businesses needing immediate funds could benefit from choosing a lender known for rapid turnaround times.
  • Customer support. Given the financial pressure many businesses faced, strong customer support and clear communication from the lender were valuable.

Application timeline: how long until you receive your BBLS funds? 

On average, the application process took a few minutes to complete, with funds typically coming within days of approval. The rapid processing was a defining feature of the BBLS, designed to get money into the hands of businesses when they needed it most.

The BBLS application process was a lifeline for many companies, but as businesses now face repayment obligations, it’s important to understand the terms and available support options fully. If your business is struggling to repay its bounce back loan, seeking advice from insolvency professionals can be a crucial step in exploring solutions, such as loan restructuring or formal insolvency measures like Creditors Voluntary Liquidation or CVL if the case may be.

The next section will delve into the specifics of the bounce back loan Scheme, including its duration, interest rates, repayment terms, and borrower obligations, providing further insights into managing BBLS debt effectively.

3. Bounce back loan (BBL) scheme - details that you have to know

The bounce back loan scheme (BBLS) was a crucial part of the UK government’s response to the financial challenges faced by small and medium-sized businesses during the COVID-19 pandemic. By offering a fast, accessible, and low-cost loan solution, the scheme aimed to provide immediate financial relief and support the continuity of businesses through a period of severe economic disruption. This section explores the key details of the BBLS, including its availability, duration, interest rates, repayment terms, and borrower obligations, as well as the controls in place to manage the use of these funds.

bounce back loan - Businessman collects wooden blocks with the word Debt Restructuring

BBLS loan duration and availability

Are bounce back loans still available?, you may wonder at the moment of reading this article. Well, the BBLS was launched on 4 May 2020 and was initially available for applications until 4 November 2020. Due to the ongoing impact of the pandemic, the scheme was extended several times, with the final deadline set for 31 March 2021. During its operation, the BBLS provided businesses with loans lasting up to six years, with options to extend to ten years under the Pay As You Grow measures introduced later to help businesses manage repayments more flexibly.

Although the scheme is now closed to new applications, businesses that have already taken out a bounce back loan continue to have access to the benefits and repayment flexibility that were integral to the scheme’s design. It’s important for businesses to stay informed about their options for managing the loan over its duration, including extensions and modifications that can help align repayments with their financial recovery trajectory.

Bounce back loan interest rate and repayment terms

One of the most attractive features of the bounce back loan scheme was its fixed, low interest rate of 2.5% per annum, which applied after the initial 12-month interest-free period. This predictable and manageable interest rate was designed to ease the financial burden on businesses during the recovery phase. Key repayment terms included:

  • Initial 12-month payment holiday. No repayments were required during the first year, providing a critical grace period for businesses to stabilise financially.
  • Fixed monthly repayments. After the initial 12 months, borrowers began making regular monthly repayments over a standard term of six years. However, to further support businesses, the government introduced Pay As You Grow options, which included:
    • Extending the loan term. Businesses could opt to extend the loan term from six years to ten years, reducing the amount of each monthly payment.
    • Interest-only periods. Up to three interest-only periods of six months each could be used throughout the loan term, allowing businesses to temporarily reduce their repayment burden.
    • Payment holidays. A single six-month payment holiday could be taken at any point during the loan term, providing additional flexibility for businesses facing temporary cash flow issues.

These flexible repayment options were intended to adapt to the varying recovery speeds of businesses, giving them the breathing room needed to return to a more stable financial position.

Taxes, Obligations, and Responsibilities of BBLS Borrowers

Although the bounce back loan provided financial relief, borrowers still have responsibilities and obligations that must be met. Importantly, the loan itself is a debt obligation of the business and must be repaid in full according to the terms agreed with the lender. Key obligations include:

  • Repayment commitment. Businesses are required to repay the loan within the agreed timeline. Failure to do so could result in penalties, increased interest, and potential legal action.
  • Use of funds. The funds from a bounce back loan should be used to support the business, such as for working capital needs, operating expenses, or to alleviate cash flow challenges. The loan should not be used for personal purposes or investments unrelated to the business’s recovery.
  • Tax implications. While the loan itself is not taxable income, businesses must still comply with all other tax obligations. Any misuse of the loan or failure to meet tax liabilities could trigger investigations and potential penalties.

BBLS payment plan and managing your repayments

Businesses struggling with repayment have several avenues for managing their BBLS debt. The Pay As You Grow options provide a flexible approach, allowing businesses to adjust their repayment plans in line with their cash flow. However, if these measures are insufficient, companies should seek professional advice. Options may include restructuring the loan, negotiating directly with the lender, or exploring formal insolvency solutions such as Creditors Voluntary Liquidation or CVL as it is usually known.

Subsidy controls and compliance. As part of the scheme’s governance, businesses are subject to subsidy controls to prevent misuse of the funds. This includes adhering to state aid rules and ensuring that the loan is used in accordance with its intended purpose. Compliance with these controls is crucial, as breaches can result in legal consequences and demands for repayment of the loan in full.

Understanding the details of the bounce back loan scheme, including its terms, repayment options, and compliance requirements, is essential for businesses navigating their recovery. Proper management of the BBLS debt, coupled with an awareness of available support and flexibility, can help businesses avoid default and explore alternative solutions if repayment becomes unmanageable.

The following section will focus on addressing what businesses can do if they cannot repay their bounce back loan, including a look at insolvency options such as Creditors Voluntary Liquidation or CVL and how professional advice can assist in managing these challenges.

4. Addressing business bounce back (BBLS) loan type debt when you can’t pay

For many businesses, the bounce back loan Scheme (BBLS) provided essential financial support during the challenging period of the COVID-19 pandemic. However, as repayments come due, some companies are finding it difficult to meet their obligations. If your business is struggling to repay a bounce back loan, it’s crucial to take proactive steps to address the debt and explore available options. This section will guide you through what to do when you can’t pay your BBLS debt, including understanding your rights, the role of insolvency professionals, and the possible pathways to manage or resolve your financial difficulties.

Understanding your options when you can’t repay your bounce back loan

If your business is unable to make its bounce back loan repayments, it’s important to know that you have several options to explore before defaulting:

  • Pay as you grow options. The government introduced Pay As You Grow measures to help businesses manage their BBLS repayments. These include extending the loan term from six years to ten years, reducing monthly repayments by making interest-only payments for up to six months (which can be used three times), and taking a six-month repayment holiday. These options can provide temporary relief and make the repayment schedule more manageable.
  • Contacting your lender. The first step if you’re struggling with repayments should be to contact your lender as soon as possible. Lenders can offer guidance and may be willing to discuss alternative repayment plans or short-term adjustments that could help ease your financial burden.
  • Restructuring your debt. In some cases, restructuring the debt might be a viable option. This could involve negotiating with your lender to alter the terms of your loan, consolidating multiple debts into a single payment, or exploring other financial arrangements that could provide relief.

When to seek professional insolvency advice

If your business’s financial difficulties go beyond the scope of simple adjustments to your BBLS repayment plan, it may be time to seek professional insolvency advice. Insolvency practitioners can provide expert guidance on your situation and help you understand the full range of options available to you, including formal insolvency procedures.

  • Signs you need insolvency advice. If your business is consistently unable to meet its financial obligations, has more liabilities than assets, or is facing creditor pressure, it’s advisable to consult with an insolvency professional. They can conduct a thorough review of your financial position and recommend the most appropriate course of action.
  • Insolvency options for businesses with BBLS debt. Several insolvency procedures can be considered, depending on the severity of your financial difficulties and the long-term viability of your business:
    • Creditors voluntary liquidation (CVL). If your business is insolvent and has no realistic prospect of recovery, a Creditors Voluntary Liquidation  might be the most appropriate step. In a CVL, the business is closed down, assets are sold, and the proceeds are distributed to creditors. This process allows for the orderly winding up of the company’s affairs and can include the formal resolution of BBLS debt. 
    • Company voluntary arrangement (CVA). A CVA can be a suitable option if your business is viable but needs relief from overwhelming debts, including BBLS repayments. A CVA is a legally binding agreement between your business and its creditors to pay back a portion of the debts over a fixed period, often with reduced monthly payments.
    • Administration. Administration is a process designed to rescue viable businesses that are struggling with cash flow problems. An administrator is appointed to manage the company with the objective of restructuring, selling, or otherwise reorganising the business to achieve a better outcome for creditors than immediate liquidation.
  • Implications for directors. It’s important for company directors to understand their responsibilities during financial distress. Failing to take appropriate action when a business is insolvent could lead to allegations of wrongful trading or other legal implications. Seeking early insolvency advice can help directors navigate these challenges and demonstrate that they have acted in the best interests of creditors.

The importance of early intervention and proactive management

Addressing financial difficulties early is crucial in preserving as many options as possible for your business. The sooner you act, the more flexibility you will have in managing your BBLS debt and other financial obligations. Key steps include:

  • Monitoring cash flow. Regularly review your business’s cash flow to identify potential shortfalls before they become critical issues. This proactive approach allows you to adjust your spending or seek additional support as needed.
  • Exploring all available support. Beyond the Pay As You Grow options and formal insolvency procedures, other support measures may be available, such as grants, alternative funding sources, or sector-specific assistance programs. Investigating these options can provide additional resources to help your business stay afloat.
  • Engaging with creditors. Maintaining open communication with your creditors can help prevent situations from escalating. Many creditors, including BBLS lenders, are willing to work with businesses experiencing temporary difficulties, especially when approached transparently and proactively.

Managing BBLS debt when you can’t pay can be challenging, but there are resources and strategies available to help you navigate these difficulties. By taking timely action, seeking professional advice, and exploring all available options, you can better manage your business’s financial position and work towards a sustainable resolution.

In summary, if your business is grappling with BBLS debt, remember that you are not alone, and there are solutions available. Whether through lender negotiation, restructuring, or formal insolvency proceedings, the goal is to manage your debts in a way that protects the future of your business or, if necessary, facilitates an orderly and responsible closure.

By staying informed, seeking professional advice, and exploring all available avenues, you can navigate the complexities of BBLS debt and take the necessary steps to secure the best possible outcome for your business. The lessons learned from the BBLS experience underscore the importance of resilience, adaptability, and proactive financial management in the face of economic uncertainty. As businesses continue to rebuild, the ability to address financial challenges head-on will be a critical component of long-term success and sustainability.