My client is struggling for cashflow on his sole trader business. He is a sole trader, haulage business with several hire purchase agreements and a bounce back loan. One option would be to extend the payback period on the bounce back loan which was taken out in May 2020.
Has anyone had any recent experience of doing this? My questions are, can this still be done and, if yes, does this alter the 2.5% interest rate?
The loan was for £50,000 and all repayments to date have been made on time if this helps.
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My understanding is...
1. Yes... the loan can still be extended (a client did this 3m ago)
2. Yes...the 2.5% interest rate is fixed for the entire period
However, if short-term cashflow is the issue, the client may also benefit from the following:
1. 6-month holiday
2. 6-month interest-only period (3 can be taken over the lifetime of the loan)
The processes for the above vary from bank to bank. Client should contact their business relationship manager.
Realistically, for short-term cashflow problems, the latter options are better (if not already 'used').
Obviously, if this is a long-term cashflow issue, further consideration in relation to solvency may be of concern.
Thanks DKB. Yes, the preferred option would probably be the six month holiday option. I wanted to see if this could still be done without messing up the fixed interest rate on the loan (given the recent rises in UK base rates).
Perfect answer. Many thank for taking the time to reply.
