Coronavirus loans: when do I have to pay them back?

• Coronavirus Bounce Back Loan Scheme (BBLS)
• Coronavirus Business Interruption Loan Scheme (CBILS)
• New coronavirus loan – Recovery Loan Scheme

Coronavirus Bounce Back Loan Scheme (BBLS)

Are coronavirus Bounce Back Loans still available?

No. The Bounce Back Loan Scheme (BBLS) launched in May 2020 and closed for new applications and top-ups on 31 March 2021.

If you’re looking for new coronavirus loans, the Recovery Loan Scheme is open until 31 December 2021.

What are the terms of coronavirus Bounce Back Loans?

Eligible businesses could apply for a loan of between £2,000 and up to 25 per cent of their turnover. The maximum loan available was £50,000. Under the BBLS:

• the government guarantees 100 per cent of the finance to the lender
• the government pays the first 12 months of interest
• you don’t need to make any repayments for 12 months
• interest is capped at 2.5 per cent
• the loan term is six years, but you can make early repayments without being penalised

The government introduced Pay As You Grow options for making repayments in September 2020, allowing customers to extend the loan term, along with other options favourable to borrowers. Read more about these below.

When do I have to start repaying Bounce Back Loans?

Businesses don’t need to make any repayments under the BBLS for 12 months. This means that repayments for the earliest BBLS loans are now becoming due.

Lenders are writing to BBLS customers to remind them that they need to start making repayments soon and to outline their options.

Pay As You Grow when repaying coronavirus Bounce Back Loans

The government’s Pay As You Grow options for Bounce Back Loan repayments are:

• extend the length of the loan from six years to 10, at the same fixed interest rate of 2.5 per cent
• make interest-only payments for six months, with the option to use this up to three times throughout the term of the loan
• request a six-month repayment holiday once during the term of the loan

There aren’t any early repayment fees or penalties.

Lenders are letting borrowers know about the Pay As You Grow options three months before their repayments start.

Borrowers can use all of these Pay As You Grow options in combination with each other, or use them individually.

But you should think carefully before using any of these options. Extending the loan term will reduce your repayments but increase the cost of the loan overall. Making interest-only repayments, or using a repayment holiday, without extending the loan term will both increase the cost of the loan and increase your repayments after.

I don’t think I can pay my coronavirus Bounce Back Loan

The first thing to do is have a conversation with your lender, who should discuss your Pay As You Grow options with you.

It’s likely that your lender will first want to work out whether your business is viable. That’s because even if it’s not viable, it’s still liable for the loan (despite the government guarantee). Your lender might then move you into their debt recovery and collections process.

If you’re considering making Bounce Back Loan repayments but you have a bunch of other debts to repay, it’s important to plan which ones you should prioritise. You can consider factors like overall cost of the debt and monthly repayment amounts when coming up with a plan.

If you do use any of the Pay As You Grow options, be clear about how they will affect future repayments. The idea is that as your business recovers, making repayments should get easier – so detailed planning should come in very handy when considering your options. We have resources to help:

• write a cash flow forecast
• plan your personal and business budget
• create a balance sheet for a snapshot of the health of your business

Coronavirus Business Interruption Loan Scheme (CBILS)

Are Coronavirus Business Interruption Loans still available?

No. The Coronavirus Business Interruption Loan Scheme (CBILS) launched in March 2020 and closed for new applications on 31 March 2021.

If you’re looking for new coronavirus loans, the Recovery Loan Scheme is open until 31 December 2021.

What are the terms of the Coronavirus Business Interruption Loans?

The CBILS was designed to help businesses affected by coronavirus access loans and other types of finance, including overdrafts and invoice finance.

Eligible businesses could access up to £5 million of finance. Under the CBILS:

• the government guarantees 80 per cent of the finance to the lender
• the government pays interest and any fees for the first 12 months
• there are terms of up to three years (for overdrafts and invoice finance) and of up to six years (for loans and asset finance)

Unlike the BBLS, there wasn’t a cap on interest initially, but a 14.99 per cent cap was introduced in June 2020. Unfortunately this means some early applicants are paying interest above this, according to YourMoney.com.

Moneyfacts.co.uk says that they were seeing rates of between 1.4 and 8.9 per cent.

Lenders couldn’t ask for a personal guarantee of any form for finance below £250,000 (a personal guarantee means that you could be personally liable for the loan if your business defaults on payments).

Above £250,000, the personal guarantee was capped at 20 per cent of the balance after assets had been applied, and it excludes your main residence.

Despite any guarantee, businesses are still 100 per cent liable for the loan repayments.

When do I have to start repaying Coronavirus Business Interruption Loans?

Many lenders applied an automatic 12 month capital repayment holiday – and the government paid interest and fees for the first 12 months.

It’s best to check with your lender about making repayments. Most lenders won’t charge early repayment penalties, so making early payments should reduce the overall cost of your loan.

I don’t think I can pay my Coronavirus Business Interruption Loan

Unlike BBLS, the government hasn’t introduced flexible repayment options for the CBILS.

And because of the larger sums of finance available – as well as the potential personal guarantee and securities involved – it’s important to speak to your lender if you don’t think you can make the repayments. Defaults will usually move into the lender’s recovery process. You should also get professional advice.

New coronavirus loan – Recovery Loan Scheme

Are coronavirus Recovery Loans still available?

Yes. The Recovery Loan Scheme has replaced the previous coronavirus loan schemes and is open for applications until 31 December 2021.

Businesses can apply for a loan of between £25,000 and £10 million. Read more about applying for the Recovery Loan Scheme.

Useful guides for small businesses

• Coronavirus support for small businesses
• A guide to grants for small businesses
• What’s the impact of Covid-19 on small businesses?
• What is business insurance?

Are you due to start repaying coronavirus loans? Let us know in the comments below.