Know your options if your company can’t pay its Bounce Back loan.
During the corona virus crisis, the government announced a scheme (government-backed Bounce Back loan) to help companies financially so companies can run their business during this covid-19 difficult time.
Many companies are approaching the first anniversary of taking out their Bounce Back loan some are discovering the additional time. If you are in this situation, you might wonder where you stand and what the consequences will be if you fail to pay off your Bounce Back loan.
If you are a company director worried about how you pay your Bounce Back loan, we ACME CREDIT CONSULTANT is here to help you.
Like other types of loans, a Bounce Back loan is need to be paid in a series of monthly payments directly to lenders. The difference between a Bounce Back loan and other types of loans is that a 12-month payment holiday period applies automatically on the borrowing. After this period ends, the lender becomes responsible for the repayment of the Bounce Back loan as per the initial agreement.
The problem is when companies first took Bounce Back loans, the further situation was unclear. Very few businesses predicted that the lockdown effect will stay for so long. Many businesses are finding themselves in a position where trade has not returned back to the pre-pandemic level, which means repaying the bounce-back is simply not possible. To help these companies, the government announced a scheme pay as you grow (PAYG) which helps businesses that need more time and additional help to repay their bounce-back loan.
How does PAYG (PAY AS YOU GROW) Bounce Back Loan Scheme help?
1. Request an extension in your loan term from 6 to 10 years at the same fixed interest rate of 2.5%.
2. The other option is available up to three times in a whole period of the bounce-back loan, reducing their monthly payments for six months by paying interest only.
3. This option is available once during the term of a bounce-back loan, take a repayment holiday for up to six months.
The businesses that took bounce-back loans can use a single option or in combination with each other.
But the businesses who use this scheme should be aware of as they have to pay interest overall if they use one or more options, also the length of the loan will increase when you use the payment holidays option.
What happens if I cannot pay my bounce-back loan?
1. Bank will send a letter to you for repayments.
2. With time, they can escalate towards debt collectors.
The main question is What are the duties of the director?
Also, the HMRC has allocated staff within a specific department focused on investigating bounce-back loan fraud.
How do I know if I have misused the bounce-back loan?
The bounce-back loan was launched to provide an economic benefit to businesses. Like to purchase machinery, Equipment or stock, and supplement staff wages, the main purpose was to give bounce-back loans to use within the business, it was not for personal use at all. Those who used this amount for personal use or misused their bounce-back loan could be held personally liable for repaying the bounce back loan fraud.