Bounce Back Loans: how they work and what borrowers can do now

No. The Bounce Back Loan Scheme closed to new applications, and to applications for top-ups, on 31 March 2021. You cannot take out a new Bounce Back Loan or add to an existing one.

Nothing with the same terms has replaced it. The government-backed guarantee scheme open today is the Growth Guarantee Scheme, which works differently: the guarantee to the lender is 70%, not 100%, and the lender sets the interest rate.

Existing loans carry on under their agreements. Government figures show £46.47bn was drawn under the scheme. At 31 March 2026, 19.38% of facilities had been fully repaid, 46.95% were being repaid on schedule and 3.87% were in arrears.

A Bounce Back Loan was a six-year term loan of £2,000 to £50,000, introduced in May 2020, that a lender could provide to a small business with a full government guarantee behind it. The key terms were:

• Amount: from £2,000 up to 25% of the business’s turnover, with a maximum of £50,000.
• Interest: fixed by the government at 2.5% a year.
• First 12 months: no repayments were due, and the government covered the interest.
• Fees: lenders charged none.
• Guarantee: the lender received a 100% government-backed guarantee on the outstanding balance, covering capital and interest.

If you still have a Bounce Back Loan, Pay As You Grow gives you three ways to lower or pause your repayments. You ask your lender for them:

Each option lowers what you pay now and increases what you pay in total, because interest keeps running for longer. The British Business Bank says using Pay As You Grow will not affect your credit rating, but that it may affect lenders’ future creditworthiness assessments. That matters if you expect to apply for other finance soon.

Speak to your lender early, before you miss a payment. The British Business Bank’s guidance is that any borrower with questions or concerns about repaying should contact their lender to discuss the options available. The Bank cannot help individual borrowers directly.

• Ask which Pay As You Grow options you have left, since some can only be used once or three times.
• Give the lender an honest picture of your cash flow, so that anything agreed is something you can keep to.
• Take independent advice from your accountant or a licensed insolvency practitioner if the business cannot meet its debts as a whole.

Closing the company does not make the loan disappear. An application to dissolve a company can be objected to because of an outstanding Bounce Back Loan, and you would need to resolve that with the lender. What an unpaid loan means for you personally depends on your business structure and your circumstances, so take advice specific to your position.

Yes, a Bounce Back Loan does not bar you from new finance, including under the Growth Guarantee Scheme. The British Business Bank says borrowers with one are not prevented from accessing that scheme, though the earlier borrowing may reduce the maximum amount you are eligible for.

In practice the bigger test is affordability. A lender will look at whether your business can carry the new repayments on top of the Bounce Back Loan, and at how the existing loan has been run. Our post on getting a Growth Guarantee Scheme loan with an existing Covid loan explains how each earlier scheme counts.

Usually not on cost grounds: the loan is fixed at 2.5% a year, so replacing it with commercial borrowing will usually cost more. Extending the term through Pay As You Grow keeps that rate.

Refinancing into the Growth Guarantee Scheme is possible as a new application. The British Business Bank notes that borrower protections and terms differ between the schemes, and that you should discuss it with your lender first. Before you consider it, compare:

• The new interest rate and fees against 2.5% with no lender fees.
• Whether the new lender would ask for a personal guarantee or security.
• The total you would repay over the full term, not only the monthly figure.

The two schemes share a principle, a government guarantee to the lender, and little else. The Bounce Back Loan was a standard product on fixed terms; a Growth Guarantee Scheme facility is a commercial facility priced by the lender.

For new finance you apply to a lender on ordinary commercial terms, with or without the Growth Guarantee Scheme behind the facility. The lender decides whether to use the scheme. Our overview of government-backed business loans sets out what else is open.

Outside the schemes, the main routes are term loans, revenue finance repaid as a share of sales, asset finance, invoice finance and revolving credit. As lender-panel figures, not offers, term loans run from £25k–£500k over 3–60 months. All of it is subject to status and lender criteria, and none of it will match a 2.5% fixed rate.

Capzy is a credit broker, not a lender, and gets paid by the lender. We take your details once, including your existing Bounce Back Loan, and show you which lenders and finance types may fit. You can check your funding options without affecting your credit score; a full application to a lender may involve a hard search.