Defaulting on Your Bounce Back Loan - The Consequences

If you're a small business owner in the UK who has taken out a Bounce Back Loan (BBL), it's important to be aware of the consequences of defaulting on the Bounce Back Loan. Though the loan terms may have seemed attractive at first, defaulting on the loan can have significant financial and legal repercussions for your business. In this blog post, we'll explore what happens when you default on your BBL and how to avoid it.

What is a BBL?

The Bounce Back Loan Scheme (BBL) is a UK government-backed loan program that was established in response to the COVID-19 pandemic. The program provided loans of up to £50,000 to small businesses that have been negatively affected by the pandemic. BBL loans are 100% guaranteed by the government, have a fixed interest rate of 2.5%, and can be repaid over a period of up to six years.

What Happens If I Default on My Bounce Back Loan? 

If you default on your BBL, the government will no longer guarantee the loan and you will become liable for the full amount plus any interest and fees. This means that your lender can take legal action against you to recover the money owed. In addition, your business will be blacklisted from future government funding programs.

How Can I Avoid Default on My Bounce Back Loan?

 
There are a few things you can do to avoid defaulting on your BBL:

 
1 Make sure you only borrow what you need:

It's easy to be tempted to borrow more than you need when taking out a loan, but it's important to only borrow what you actually require. If you're not careful, you could find yourself in over your head and struggling to make loan repayments.

 
2 Create a realistic budget and stick to it:

Once you've determined how much you need to borrow, create a budget that outlines your monthly income and expenses. This will help you track your spending and ensure that you're able to make your loan repayments each month.

 
3 Prioritise making your loan repayments:

When it comes to managing your finances, making your loan repayments should be one of your top priorities. Try setting up automatic payments so that you don't miss a payment, and if possible, consider making extra repayments so that you can pay off your loan ahead of schedule.

Struggling to Repay Your Business Bank Loan? Here Are Some Options to Consider

If you're struggling to repay your business bank loan, you're not alone. With the COVID-19 pandemic causing widespread economic disruption, many small businesses are finding it difficult to meet their financial obligations. However, there are some options available to help you get back on track.

 
Deferral or Forbearance Plans

Many banks are offering deferral or forbearance plans for small businesses that are struggling to make their loan payments. These plans allow you to temporarily postpone or reduce your payments until things improve. While this can be a helpful option in the short-term, it's important to remember that you'll still need to repay the full amount of the loan plus any accrued interest.  You can contact your back to arrange these. Some banks will let you do this online via their online portal.

Loan Modification

If you can't afford the scheduled payments on your loan, you may be able to modify the terms of the loan. This could involve extending the repayment period, up to 10 years. Loan modifications are typically only available for loans that are currently in good standing. You'll need to contact your bank to see if a loan modification is an option for your situation. Again, with some banks this can be done online.

Payment Extensions

If you're unable to make a scheduled payment, most banks will allow you to extend the payment due date. This will give you some extra time to come up with the funds needed to make your payment. However, it's important to note that this is not a long-term solution and you will still need to repay the full amount of the loan plus any accrued interest.
 

 
If you're struggling to make your business bank loan payments, there are several options available to help you get back on track. You can consider deferring or modifying your loan or extending your payment due date.  Talk to your bank about which option is best for your situation and take action sooner rather than later to avoid defaulting on your loan payments.

Defaulting on your BBL can have serious consequences for your business, so it's important to do everything you can to avoid it. By following the tips above, you can help ensure that you stay on track with your loan repayments and avoid any negative repercussions down the road.

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