Loans are important parts of the financial world, as they can not only help individuals to navigate their way through sticky financial situations, such as unexpected payments, but they are also an important part of the world of business, as many businesses, both big and small can depend on loans to help them to also navigate through difficult financial situations.
As such, there are countless different types of loans designed to help specific groups of individuals and different loans for businesses and organisations of different sizes. As a result of this, you’re probably reading this now because you have heard about the concept of bounce back loans, and now you want to know what they actually refer to.
Well, you have come to the right place, because today we are going to take a deep look at exactly what a bounce back loan is. What it does. Who it is intended for, and even more! Make sure to dive in down below, because there are some real surprises contained within!
What Is A Bounce Back Loan?
A bounce back loan is a special type of loan that was introduced in the UK in the wake of the Coronavirus pandemic. The loan is designed to be accessed by small to medium-sized businesses and to give them direct access to money that can help them “bounce back” directly from the impact that the pandemic had on the UK economy.
The loan, offered directly from the government, has a low interest rate, and offers values between £2,000 and £5,000.
How Do You Pay Back A Bounce Back Loan?
Of course, as with any loan, a bounce back loan must eventually be paid back. Luckily, the bounce back loan is designed to have a very low interest rate, to help take the pressure off of businesses and especially the UK economy.
The loan can begin to be paid back up to 12 months after the loan has first been received. Once this 12-month period has elapsed, the business can pay back any amount at a time building towards the full amount. However, the loan amount must be paid back within a period of 6 to 10 years, depending on the specific circumstances of the business.
If necessary, a business can apply for an extension, which allows them to extend the repayment period from 6 years to 10 years. This slightly increases the interest rate but fixes it firmly at around 2.5%. A business can also request a repayment holiday of up to six months, which allows them to stop paying back the loan for a period of six months. This holiday can only be taken a few times.
What Happens If You Don’t Pay Back A Bounce Back Loan?
If it is found that a business has not paid back its bounce back loan, then the company will be directly investigated by the Insolvency Service. The Insolvency Service is a governmental agency designed to investigate businesses that have been accused of financial misconduct, and also to release public information about all businesses facing insolvency.
Being investigated by the Insolvency Service can be a significant stain on the reputation of a company, whether the company is big or small, thus it is best to avoid a situation in which a company may be investigated by them.
Is It Possible To Have Multiple Bounce Back Loans?
It is only possible to have one bounce back loan per business, however, it is possible for an individual to claim a different bounce back loan for every individual business they operate. Thus, entrepreneurs that run multiple businesses are able to easily access funds for each of their businesses.
However, if it were to be found that a bounce back loan that was intended for one business was then instead used for another business, or was instead used for personal reasons, then the business would be implicated and potentially brought to court, which can lead to some very heavy fines being charged. As well as this, the leader of a company found guilty of misconduct is likely to be forcefully removed as the director of said company.
As you can now see, a bounce back loan is a type of loan designed by the UK government to help businesses of varying sizes to bounce back from the significant impact that the Coronavirus pandemic had on the UK economy.
The loan has helped many businesses to survive and continue in the wake of the pandemic, but of course, as with any loan, it needs to be paid back, and this can be done in increments provided the business pays it back within a period of six years, or ten years if they have applied for the appropriate relief package to make it easier to repay the debt.
Failing to repay the debt can incur some serious fines and penalties, such as an investigation by the Insolvency Service, or even the risk of the president of a given company being ousted from their position as director.
Frequently Asked Questions
Do I Have To Pay Back A Bounce Back Loan?
Yes. As with any loan, a bounce back loan needs to eventually be paid back and is not just free money. The money received from the bounce back loan must be paid back, with interest, within a period of 6 to 10 years of reception. Luckily, the interest rate on the bounce back loan is designed to be very small, making it easier to pay back.