Factoring loan repayments into your cash flow

Loans made available to struggling businesses during the pandemic could cost the Government billions if recipients default on repayments.

This is because the Government has promised to pay lenders back if borrowers cannot.

If you are a business that has accessed any of the Government-backed loan schemes, to mitigate the impact of Coronavirus on your cash flow, you should have already put some thought into how you intend to pay this back.

If you haven’t yet, as we emerge from the most recent lockdown and begin to see some semblance of normality returning, now is a good time to factor any repayments into your cash flow.

Know the repayment terms and options

Depending on which loan scheme you’ve accessed, it’s important to familiarise yourself with the repayment terms and options available to you.

For example, those who have secured finance under the Business Bounce Back Loan Scheme (BBLS) can choose to:

  • Extend the length of the loan from six to 10 years.
  • Make interest only payments for six months, up to three times.
  • Take a six month repayment holiday, once during the term of the loan.
Prioritise your debts

If you have other debts, in addition to a Government-backed loan, you should consider which of these should be prioritised. Take into account interest rates and assess how repaying your debts will impact upon your wider financial commitments.

Include loan repayments in your cash flow projections

When putting together cash flow projections, factor your loan repayments in just as you would other regular payments.

Doing this will avoid any ‘it slipped my mind’ surprises and make certain your projections for the next six to 12 months are as accurate as they can be. This will ensure any business decisions you make are founded on the right numbers.

Speak to an adviser

If you’re concerned about the viability of your business or cash flow forecasts, you should speak to a professional adviser. We can help you to generate accurate cash flow forecasts and to understand your prospects going forward.

To discuss your circumstances in more detail, contact our team of expert advisers today.

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