During the early stages of the pandemic, the British government introduced a scheme to help small and medium-sized companies borrow money to keep them in business. Cash flow has been a problem for many within the UK, so millions of businesses desperately needed these emergency loans.
Company directors were allowed to borrow from £2,000 to £50,000. After being granted the loan, the borrower didn’t have to pay any fees or interest for the first year. Twelve months after borrowing the money, those who took the loan would have to pay 2.5 percent interest a year.
These much-needed loans helped businesses across the country stay afloat. However, some companies expected that business would eventually pick up, especially when the strict covid regulations that were in place were lifted. However, many are still struggling to make the repayments. These loans appealed to many because you didn’t need a personal guarantee to apply.
What is PAYG?
Because so many companies assumed they would be able to make the repayments, many didn’t worry at the time when they received the loan. At the end of the day, companies all around the globe borrow money on a regular basis to keep their business afloat. The problem was that nobody could have predicted the extent of the financial damage the pandemic would have caused.
Today, there are several companies in financial difficulty due to the impact of Covid-19 who can’t pay bounce back loan, which is why the government brought in a scheme known as PAYG. The Pay As You Grow scheme is ideal for those who seek additional financial assistance and extra time to make the repayments.
Talk to a professional
During the pandemic, approximately 1.5 million emergency loans were granted in the UK alone to small and medium-sized businesses. If you cannot make the repayments, you are not alone!
Like many others, you might have thought your business would have been running the same way it was running before the virus swept across the country, but all of a sudden you have found yourself up to your eyes in debt. Of course, you can try to figure out a solution, but you might want to consider speaking to a professional financial expert for advice. Several reputable financial companies in Britain specialize in repaying emergency loans. These companies will do whatever it takes to help you through the process, and they will try everything to find solutions to your financial issues.
What happens if I can’t pay it back?
Even with the PAYG scheme in place, there are still lots of businesses in dire straits. Some companies that took a bounce back loan over the past couple of years had other loan repayments to make, making it even harder to pay back the emergency loan.
When the scheme began, the government decided to provide the banks with one hundred percent security for every penny they gave to borrowers. If the borrower couldn’t make the repayments, the financial institutions that issued the loan would ask the government to make the repayments instead of the business directors.
Although this encouraged a lot of company directors to apply for the loan, they must keep in mind that the government’s guarantee only exists if the business is declared insolvent. If the company is still in business, the company is responsible for making repayments.
Can the loan be written off?
These emergency loans that were issued during the pandemic were given to companies, not individuals. If the business goes into administration or liquidation, then the government or bank will write off the loan. However, many company directors took out bounce back loans to help them pay back outstanding personal debts, so the director could be held responsible. Suppose the company does go into liquidation, and the liquidator thinks the money was used for personal loans, or perhaps they think it was stolen from the business. In that case, you can expect an investigation to go underway. Not only will the director find themselves in hot water, but they will also be disqualified from their position in the business.
The government is now predicting that almost half of the companies that took out a bounce back loan in 2020 and 2021 won’t be able to repay the loan. There has been a lot of talk about a special grant being given to small businesses who are struggling to make the repayments to write off the loan, but they expect to be given all-employee equity stakes in return.
Conclusion
Just because the pandemic seems to be coming to an end, businesses in the UK and the rest of the world are still finding it difficult, but before liquidating a company due to financial issues, consider all of your options first. The long-term damage the pandemic has had on the country’s economy has been devastating, and it might take several years for things to improve.