It goes without saying that keeping your business financially stable throughout the pandemic wasn't exactly easy, and you've probably noticed just how much of a knock COVID-19 has had on our local high streets and businesses — many of which are now completely disbanded.
Plenty of new opportunities for making money opened up during the pandemic, but it was obviously harder for some businesses than others to get back on their feet and reach the same kind of turnover they were receiving before lockdowns started; so the UK government introduced a few different schemes to help support struggling businesses and ultimately keep the economy moving.
One of the main initiatives that was being pushed at the time was the Bounce Back Loan Scheme, which provided financial aid to any small or medium-sized enterprises (SMEs) that weren't able to pay their employees, utility bills, or any other kinds of expenses that you couldn't afford due to the lockdowns.
In 2024, we're long past being able to apply for one of these kinds of loans now — given that new applications were closed in 2021 — but for anyone who did take one out, you might be wondering whether it can be written off or not.
So, throughout this article, we're going to be taking a closer look at all you need to know about the Bounce Back Loan Scheme, covering things like the repayment terms, if there's any possibility of loan forgiveness, and how we can work through some of the more challenging aspects of loan repayment.
Understanding the Bounce Back Loan Scheme
Kicking things off, let's walk through some background information regarding what the Bounce Back Loan Scheme (usually abbreviated as BBLS) actually was for anyone reading who might be slightly unfamiliar.
In essence, this was a financial scheme launched by the British Business Bank in response to some of the clear economic disruption to local businesses being caused by the pandemic, and it was mainly designed so that SMEs could receive quick access to the funds needed to keep the lights on during these times.
Now, one of the key advantages of the Bounce Back Loan Scheme was how easy it was to access as a business owner looking for some capital, as you could borrow from between around £2,000 and 25% of whatever your annual turnover was (capped at a maximum of £50,000).
Obviously, time's generally of the essence when it comes to cash flow issues and the need to pay suppliers, etc., so the application process was made to be as streamlined as possible, too — both with minimal paperwork and a swift approval mechanism so that it could be a lifeline struggling enterprises.
Loan Forgiveness and Write-Off Possibilities
With some of the basics out of the way, it's now worth mentioning that there isn't currently any kind of blanket provision for you to be forgiven outright or to write off your Bounce Back Loan; they're subject to repayment in accordance with whatever terms you had agreed upon at the time when you took the loan out.
Having said this, these loans were special in that they were obviously designed for pretty extenuating circumstances, and as such, the government is pretty lenient in their approach when it comes to repayment — offering plenty of support if your business was hit particularly hard by covid and you've taken on an excessive amount of debt.
Technically speaking, the only way you can legally write off a Bounce Back Loan is by going through a formal insolvency process, essentially liquidating your company so that the debt from the loan can be considered impossible to collect, which applies to both the lender who gave the loan and potentially even to the government itself.
So, unless your company goes through this process, you're unfortunately — albeit with courteous repayment terms — still going to need to repay that loan, as there's no other way to get around it or write it off.
Repayment Terms and Options
So, while the funds provided some much-needed relief to businesses — possibly even yours — like all loans, attention was naturally going to turn towards what the repayment obligations were because it certainly wasn't a grant or anything akin to the stimulus relief that was issued nationwide throughout the United States during the pandemic.
If you did take part in the Bounce Back Loan Scheme, it's paramount that you've got a solid understanding of the repayment terms so you can manage your finances properly, but fortunately, you might've been offered a repayment holiday offered that gave you a chance to defer from having to make any repayments at first so you can get back on your feet.
Still, an interest rate is still being applied throughout this whole period, so that'll only add further to the overall cost of the loan, even if not by too much.
When your repayment holiday period does, however, end, you're naturally going to need to start making monthly repayments that consist of both the principal amount that you've borrowed and whatever interest payments you've accrued.
It's worth mentioning, too, that the loan term is fixed (with the same fixed interest rate) and usually spans up to around six years, although you've still got the chance to make early loan repayments without incurring any kind of additional fee.
At the time, the government introduced a ‘Pay As You Grow' initiative that gave you a chance to manage your loan repayments, too, allowing you to extend the loan term, move to interest-only repayments for a certain period, or even take repayment holidays under particular conditions — all of which with the aim of alleviating as much of the financial burden on your business as possible.
As such, these were definitely some of the more ‘charitable' business loans out there, as you'd generally never expect to be guaranteed such flexibility in your loan repayment terms, irrespective of the size of your company or your creditworthiness.
Impact on Credit Ratings and Future Financing
Moving forward, let's take a look at what kind of impact your Bounce Back Loan is going to have on your credit ratings (and, therefore, your future prospects of obtaining financing for your business).
Of course, these loans were primarily designed just to provide businesses with immediate financial relief during the pandemic when your supply chains and general cash flow were disturbed, but they also become part of your business's financial history and are reported to credit reference agencies like any other kind of loan would be.
As such, similarly to traditional bank loans, you'll be looked at far more positively if you're able to repay your Bounce Back Loan in a timely fashion, and it tends to improve your business's credit profile since it demonstrates you're fairly responsible when it comes to financial management.
Obviously, this works exactly the same in reverse, too, meaning any defaults or payments that you've missed — even by a day — are going to have a knock on the creditworthiness of your business, so that'll only make it more challenging to find future credit facilities or business lending later on once you've paid the original BBL off.
In fact, any existing debt repayments that you've got, even including Bounce Back Loans, are always going to be factored into the lenders' assessment when they consider you as a new financing applicant since high levels of debt almost always raise concerns about your business's ability to service any additional debt responsibilities.
Navigating Loan Repayment Challenges
If your business is struggling pretty severely with overcoming debt or any other kinds of cash flow issues, don't panic! There are plenty of ways you can be proactive and alleviate some of the pressure that comes with taking a loan out so that you've got a much smoother repayment journey.
So, let's round the article off by walking through some of our top tips for managing your Bounce Back Loans repayments effectively:
Create a Detailed Financial Plan
Firstly, you'll want to start by making a detailed plan for all of your business finances, meaning sitting down and figuring out exactly how much money your business is making, what your expenses are, and how much you owe in loans so that you've got a clearer picture in your head of how much realistically going to be able to pay back each month.
Open Communication With Your Lender
As touched on, these loans are fairly unique in that the repayment terms are generally a lot more charitable than your average bank loan, so if you're really finding it difficult to meet your loan repayments, don't hesitate to arrange a simple chat with your lender so you can let them keep them in the loop.
Again, they understand that Bounce Back Loans were made for businesses going through particularly tough times, so you should hopefully find that the vast majority are at least willing to work with you so you can come up with some kind of repayment plan together to suit your situation.
You should have a decent amount of flexibility here, so this could involve things like lowering your monthly payments, extending the time you have to pay back the loan, or even temporarily pausing your payments altogether.
Identify and Cut Costs
This might be easier said than done — especially if you're already a small business owner who isn't exactly rolling in cash reserves — but one of the best ways you can free up a bit of cash for your loan repayments can simply be looking at some of your business expenses so you can see what opportunities you have to make cuts.
You might have to be fairly creative here, but, for example, you could try to renegotiate some of the contracts you have with your suppliers so you can get slightly better deals, find ways to reduce your energy bills (perhaps move to more energy-efficient lights or machines), or even cutting back on non-essential expenses for you and your employees, like office supplies or travel.
Obviously, you'd never want it to reach a point where you need to let some of your employees off in order to make the bare minimum repayments on your loan — even more so if you're running a small team already where everyone plays a critical role — so always aim to explore alternative options first to stay afloat.
Explore Alternative Funding Options
Still, even if after cutting various kinds of costs that you've discovered your business could probably do without that, you're still struggling to make your loan payments, it might be time to consider looking into obtaining some additional funding, whether that's applying for grants or loans from the government or even crowdfunding from your customers or community.
It's worth mentioning that these are naturally fairly last-ditch efforts, so you should try not to be too aggressive in your approach to things like crowdfunding in case your business ultimately is still unable to recover and has to explore liquidation options.
Having said that, sometimes a helping hand from your community or an additional bank loan with more favourable terms can be all you need in order to keep up with your loan repayments, so this might just save you if all else fails — just keep in mind what kind of impact repeatedly taking out business loans might have on your credit score in the long term, even after paying the original Bounce Back Loan off.
Monitor and Manage Your Cash Flow
It goes without saying that cash flow plays a critical role in any business's chances of success, so try to make sure that you're keeping track of how much money is coming in and going out of your business each month — as well as chasing all of your customers up for any late payments you might be waiting on (alternatively you could always explore invoice discounting or financing for some relief here).
Ultimately, staying on top of your cash flow means you'll be able to ensure you always have enough money on hand to make your loan payments on time, so try to make this a priority.
Plan for the Long Term
Finally, it's also essential that you’re thinking about the future of your business and how you'll manage your finances in the long term.
This means not only making sure you can make your loan payments now but also thinking ahead and considering what changes you might need to make to your business model or operations to ensure your long-term financial stability.
