Bounce Back Loans Pay as You Grow: Our 101 Guide

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With the end of Covid restrictions in the UK, it’s our hope that business owners and the self-employed will be able to focus on repaying any Bounce Back Loans via Pay as You Grow schemes – rather than requiring more government funding as a result of restrictions and consequent challenges to business income.

Indeed, dare we say, it feels as though recovery mode is in full swing up and down the country, with many businesses beginning to regain some sense of what operations were like pre-pandemic.


We’re here for you and your business 

At The Brew, our responsibility as the chosen coworking space for businesses extends much further than just furnishings and fittings. We’re here to connect you to all the right resources, resources that will help you maintain momentum throughout the year.

Our 101 on Bounce Back Loans Pay as You Grow will help to ensure that this years’ success isn’t overshadowed by over-complicated loan repayments. And instead, provide you with all the information you need to set your sights on the end goal – as well as giving you guidance on your options, should there be any bumps in the road. And you’re not alone either – over 1.5 million business owners in the UK applied for the funding, that’s 1.5 million individuals who, like you, will be spending this time calculating their options.

So, grab a coffee, and let us guide you through it. You got this.


What is the coronavirus Bounce Back Loans Pay as You Grow Scheme?

When coronavirus restrictions started to take their toll on businesses, the UK government introduced Bounce Back Loans to help elevate some of the inevitable financial strain.

Eligible small-to-medium sized businesses could apply for a loan of from £2,000 and up to 25 per cent of their turnover. The maximum loan available was £50,000.

Under the Bounce Back Loan Scheme:

  • the government guarantees 100 per cent of the finance to the lender
  • the government pays the first 12 months of interest
  • no repayments were required for the first 12 months
  • interest is capped at 2.5 per cent
  • the loan term is six years, but it is possible to make early repayments without being penalised

What do repayments for Bounce Back Loans via Pay as You Grow look like in practice?

The key features of the government Pay as You Grow scheme for Bounce Back Loan repayments are as follows:

  • 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 loans
  • Request a six-month repayment holiday once during the term of the loan
  • There won’t be any early repayment fees or penalties

If you have taken out a Bounce Back Loan, then your lender will be getting in touch to let you know about the Pay as You Grow options three months before their repayments start. You are able to utilise all Pay as You Grow options in combination with each other, or use them individually.

Like all money lending, it’s important to think carefully before committing to any of the above-mentioned 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.

It’s a good idea to weigh up all of the pros and cons for each repayment option, outlining the potential costs of each before you make your final decision on Bounce Back Loans Pay as You Grow.


Are coronavirus Bounce Back Loans still available?

No, Bounce Back Loans launched in May 2020 and closed for new applications and top-ups on 31 March 2021.


When do I have to start repaying Bounce Back Loans?

Repayments for Bounce Back Loans will start when the repayment holiday on your existing Bounce Back Loan ends – 12 months after you took the original loan amount and will include both capital and interest repayment.

You should be able to find your first repayment date and amount on your Bounce Back Loan documents.


How do I access Pay as You Grow?

Businesses first began to receive Bounce Back Loans in May 2020, and so the first repayments became due from May 2021 onwards. Lenders will start to communicate Pay as You Grow options to Bounce Back Loan Scheme borrowers three months before repayments commence.

Lenders will advise customers about how their repayment options may change according to their choices under the scheme.


Are there tools available to help me prepare for repayments?

There are plenty of online tools that can help you prepare for your Bounce Back Loan repayments. These are a great resource to help you plan your finances more accurately over the coming year.

You simply need to know the original loan amount and the start date of your agreement; the Bounce Back Loan calculator will do the rest.


Will using Bounce Back Loans Pay as You Grow affect my ability to obtain finance in the future?

An understandable concern many borrowers have when opting to use the Using Pay as You Grow scheme is whether or not this will have a negative impact on their access to future funding. The good news is, in principle, it will not affect a business’s ability to obtain finance in the future.

Pay as You Grow is designed to alleviate borrowers’ financial difficulty, even before it arises, by giving borrowers flexibility in meeting their repayment obligations. Using Pay as You Grow will not affect a borrower’s credit rating, however it may affect lenders’ future creditworthiness assessments.


Are Bounce Back Loans different from Coronavirus Business Interruption Loans (CBILS)?

With a Bounce Back Loan, you could borrow from £2,000 up to £50,000 (to a maximum of 25% of your annual turnover). It’s offered over a fixed 6-year term, though there are no fees if you want to repay the loan early. The loan is 100% guaranteed to the lender by the government, with no personal guarantees needed. However, the loan holder remains 100% responsible for the debt.

The Bounce Back Loan Scheme is provided through a government scheme and does not benefit from the same level of consumer protection as other loans.

Under CBILS, you could borrow between £50,001 and £5m over a term of up to 6 years. No early repayment fees apply. The government guarantees 80% of the loan to the lender. However, the loan holder remains 100% responsible for the debt and security may be required. Loans are subject to affordability criteria.

Both offer an initial 12-month repayment holiday (this may mean you pay more interest over the loan term).


Can I request a repayment holiday extension?

Yes. Under Bounce Back Loans Pay as You Grow, you can apply for a 6-month Capital Repayment Holiday, up to 3 times during your loan term. During this repayment holiday, you’ll only make interest payments.

You can also request a single 6-month Capital & interest repayment holiday. You won’t make any payments during this time, but interest will continue to accrue.


Can I request a repayment holiday and to extend my loan term at the same time?

Yes, you can apply for multiple Pay as You Grow options at the same time, but each request will be processed separately by your lender, therefore it’s important to leave enough time to apply before your repayments are due.


Is my credit score impacted if I miss a repayment?

No, your credit score is not impacted if you miss a repayment. However, some banks have said they will take defaults into account for future loans. It is also important to note that this is a loan and not a grant, so lenders will chase for payments just as they would with any standard loan that they have.


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

If you are feeling uncertain about whether you can repay your 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 do use any of the Bounce Back Loan 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. There are resources that can help with this too, such as writing a cash flow forecast, planning your personal and business budget, and creating a balance sheet for a snapshot of the health of your business.


And so there you have it. Your 101 guide to Bounce Back Loans Pay as You Grow from your supportive team here at The Brew.

Of course anything related to money and debt is bound to come with a very specific list of anxieties and pressures. So alongside your commitments to repayments, make sure you’re taking time for yourself.

And yep, you guessed it – our blog can help with that too. From quotes to reboot your creativity, to 12 ways to achieve a better work life balance, we’re here to nurture and grow both you and your business.