“The Bounce Back Loan has been a millstone around my neck”

COVID-19 is a distant memory to most Brits. But many UK entrepreneurs are still paying off COVID business loans, and the debt threat has become a dark cloud hanging over them.

The Bounce Back Loan Scheme (BBLS) was first introduced in 2020, and was designed to give businesses quick access to life-saving funds during the Coronavirus pandemic.

The scheme closed in 2021. However, since then, poor economic conditions and an energy price meltdown have combined to leave many borrowers unable to clear their debt.

Coaching practitioner and founder, Sarah Gatford, describes the Bounce Back Loan scheme as a “massive misnomer”, adding “it has been more of a millstone around my neck. My BBL has definitely not helped me bounce back.”

“I broke down and asked my parents for help”

The Bounce Back Loan Scheme (BBLS) was a government-run scheme established in 2020, in the wake of the initial Coronavirus outbreak.

The loan programme became a vital lifeline for many SMEs in the months following the first COVID lockdown, allowing them to borrow up to £50,000 to contend with the pandemic’s impact. As of 31 July 2022, businesses had drawn a total of £46.6 billion through BBLS.

For the first 12 months of the scheme, no repayments were required. However, since then, many organisations who relied on the funding to plug their losses during COVID have been left with significant debt, creating a burden on cash flow without generating extra income.

Denise Yeats was a freelance events producer. When events were cancelled during COVID, her income was slashed, so she leaned on the BBLS to be able to pay her rent. Having since started a coaching business, she says the repayments are stifling her new venture.

“I took out a £10k BBL thinking [COVID] would be a one-year crisis,” she says. “In April 2023, I was at an all-time low, suffering mentally at my inability to bring in enough income.

“I finally broke down and asked my parents to help me clear my BBL. I consider myself resilient but my debt to them now hangs over me.”

BBL repayments “a chunky part of our overheads”

It’s a similar story for Josie Jones, founder of The Mindful Cook. Jones organised a wellness retreat for women which was cancelled during COVID.

Jones took out a BBL of £5k in order to refund her customers, which she is still paying back today. “Small numbers can really have a big impact on a small business,” she says.

The situation has not been helped by a slow post-COVID economic recovery, which has made trading conditions difficult and added to other challenges faced by today’s SMEs.

Jo Spolton is founder of sustainable ecommerce business Rumage. Spolton is also struggling to repay BBLS debt as today’s poor economy stifles customer spending.

“The monthly payback represents a chunky part of our overheads,” says Spolton. “We have utilised some of the payment holidays available so far to keep the business on track. [But] with the economy still struggling, the Bounce Back Loan is adding to the strain.”

What if I can’t pay back my Bounce Back Loan?

Reuters’ analysis of the most recent government data, released at the end of 2023, showed that around 1.1 million loans granted under the BBL scheme are still outstanding today.

Lenders may take legal action if a company is unable to pay back a loan. Thankfully, all firms with a BBL can apply to extend their loan term or take a repayment holiday, through Pay As You Grow (PAYG), a government-backed support programme specifically for the BBLS.

Rachael Dines, founder at marketing company, Shake It Up Creative, has advice for fellow entrepreneurs who are struggling to make their BBL repayments.

“During the repayment period, it feels like a rock on your back,” she acknowledges, “little by little my company has recovered and is now in a healthy position [although] we have had to continue to be careful about outgoings along the way.

“My advice to any small business owner would be to try and pay small extra amounts off when you’re able to, gradually shrinking the interest down and speeding up the process.”