Bounce Back Loan repayment options

A Bounce Back Loan is repaid at a fixed 2.5% a year over 6 years, or up to 10 years if you use Pay As You Grow, and you are 100% liable for it: the government's guarantee pays the lender, not you. Loans taken in May 2020 on the original term reach their last payment in 2026; the last loans, applied for before the scheme closed to applications on 31 March 2021, run to 2027, or 2031 if extended.

Our view: at 2.5% fixed, a Bounce Back Loan is almost certainly the cheapest debt your business has. Do not replace it with dearer borrowing to free up cash. If the repayments are the problem, Pay As You Grow costs less than any new loan.

Terms from the British Business Bank, checked 1 November 2026.

How the bounce back loan was set up

• Borrow £2,000 up to 25% of turnover, capped at £50,000.
• Interest fixed at 2.5% a year; the government paid the first 12 months of interest and no repayments were due in that year.
• A 6-year term, with no early repayment charges.
• A 100% government guarantee to the lender, and no personal guarantees.
• Not regulated under the Consumer Credit Act 1974, so its usual protections for business borrowing under £25,000 do not apply.

The three Pay As You Grow options

Announced on 24 September 2020, Pay As You Grow gives every borrower the same options, used alone or together:

1. Extend the loan from 6 to 10 years at the same 2.5%.
2. Pay interest only for 6 months, up to 3 times during the loan.
3. Take one repayment holiday of up to 6 months.

You pay more interest overall if you use any of the options, and a repayment holiday lengthens the loan. Using Pay As You Grow does not affect your credit rating, but lenders may weigh the outstanding loan in future credit decisions. Your lender sets out the options; Barclays still lets borrowers apply in Online Banking and its app.

If you cannot pay your bounce back loan

Talk to your lender before you miss a payment. The British Business Bank says borrowers worried about repaying should contact their lender, which explains the options in light of any other borrowing you have with it. If you have already used Pay As You Grow, ask what forbearance the lender offers next.

If the loan goes unpaid, the lender pursues the debt, and the government guarantee covers the lender's loss, not yours. No recovery action can be taken over the borrower’s main home or primary personal vehicle; sole traders and partners, who lack limited liability, may have other personal assets at risk. A limited company with a Bounce Back Loan outstanding cannot simply be struck off: the lender can object, and the British Business Bank says the lender, not the bank, deals with that objection.

Not happy with how the lender has treated you? Complain to the lender first, then the Financial Ombudsman Service.

Refinancing or borrowing alongside a bounce back loan

Refinancing into the Growth Guarantee Scheme is allowed as a new application, where your total need is above the scheme's minimum facility size. The British Business Bank warns that borrower protections differ between the schemes, so refinancing a 2.5% loan into a lender-priced Growth Guarantee Scheme loan only makes sense if you also need new money. See government-backed business loans.

If you need working capital on top, lenders will count the Bounce Back Loan repayment in your affordability. Newer businesses can look at a Start Up Loan at 7.5% fixed; card-taking businesses can repay an advance from takings, which flexes in quiet months but costs far more than 2.5%. The business loan interest rates comparison puts the options side by side.

Tight on cash flow? If you take card payments, a free statement review checks whether you are overpaying on card fees before you look at any new borrowing.

Frequently asked questions