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Bounce Back Loans – Guidance for Business Owners

The Bounce Back Loan Scheme was launched to assist UK businesses to survive the pandemic and by enabling them to obtain a six-year term loan (later extended to 10 years) at a government set interest rate of 2.5% per annum.

We are currently receiving a number of enquiries regarding the repayment of these loans and what might happen in a situation where the business is unable to pay. Ben Cowgill, Director at Cowgills Business Recovery addresses some of the questions we are being asked.

Bounce Back Loans – a quick summary

  • The loans were handed out with generous terms compared to any other commercial borrowing
  • First 12 months of interest paid by government, then 2.5% pa interest
  • Repayments deferred for 12 months
  • Businesses can borrow between £2,000 and £50,000 – the amount is capped at 25% of total turnover (usually for calendar year 2019, or new businesses can estimate)
  • The deadline for applications was originally 30 November 2020, which was first extended until the end of January 2021, and then until 31 March 2021

The Bounce Back Loan Scheme opened for applications on 4 May 2020 so, for those early borrowers, the 12-month repayment deferral will end in a few months’ time.

My business took the loan but hasn’t yet spent the money – what should I do?

With the country in lockdown again with no indication as to when restrictions will end, and with some sectors of business not yet feeling the true impact (but knowing that the road ahead is going to be full of obstacles) you must ask yourself if the borrowing might be needed at some point in the future.

If the answer is ‘yes’ or ‘maybe’ then you are unlikely to find cheaper funding anywhere else, so our advice would be to hold onto it. The interest on a £50k Bounce Back Loan is just over £100 a month with no personal guarantees.

If the answer is ‘no’ then either:

  1. Pay it back to avoid unnecessary liabilities on your balance sheet and save the interest costs.

    If you have used some of the money, you can repay any unused loan, so you are only paying interest for the funding that you actually need.


  1. Spend it on your business – If there is a genuine opportunity to expand or improve your business, this could lead to generating more income/improving your profits, with which you can repay the loan.


  1. Invest it elsewhere – You could invest some or all of your loan money, to provide enough return to cover the interest. To cover both the interest AND the capital repayments, you would need 12% pa return on a £50,000 investment.

    Be mindful though that if your company fails and enters formal insolvency (e.g., liquidation or administration), the use of Bounce Back Loans for non-business expenditure may be demanded back by the insolvency practitioner.

I have spent the Bounce Back Loan but my business is still failing – what can I do?

This is fully understandable and not uncommon in the current environment. Perfectly well-run businesses have and will sadly continue to fail at no fault of the owner(s).

In this instance there is no consequence for the director/owner as long as the money has genuinely been used for wholly business purposes.

However, if the money has been used for non-business purposes, it will be a different story. The guidelines have not yet been been specified, but we expect repayment demands/increased taxes and director disqualification in this situation.

If your business requires a Bounce Back Loan, it is not too late to apply although most lenders will require you to book a background-check appointment, so don’t leave it to the last minute.

If your business is struggling and/or you are concerned that you will not be able to repay your Bounce Back Loan, please contact Ben at ben.cowgill@cowgills.co.uk for a free, no-obligation and confidential chat.


The information was correct at time of publishing but may now be out of date.

Business Recovery
Posted by Ben Cowgill
18th January, 2021
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