Comparison Guide Β· 2026/27
Bounce Back Loan Legacy Debt vs Growth Guarantee Scheme UK 2026
Many small businesses that took a Bounce Back Loan during the pandemic still have outstanding balances, and some are now considering the Growth Guarantee Scheme β the successor to the Recovery Loan Scheme β for further finance. This guide compares managing legacy Bounce Back Loan debt using Pay as You Grow options with taking new Growth Guarantee Scheme finance in 2026/27, covering repayment flexibility, lender criteria and how the two interact.
At a Glance
| Feature | Bounce Back Loan (legacy, PAYG) | Growth Guarantee Scheme |
|---|---|---|
| Purpose | Managing/restructuring existing pandemic-era debt | New finance for cash flow or growth |
| Government guarantee | 100% to lender (original BBLS terms) | Partial guarantee β percentage set by scheme rules, not 100% |
| Approval process | Not applicable β loan already taken; PAYG requested from existing lender | Normal commercial credit assessment by accredited lender |
| Flexibility available | Term extension, interest-only periods, repayment holidays (PAYG) | Standard commercial repayment terms set by lender |
| Effect of existing BBL debt | N/A | Assessed by lender as part of overall creditworthiness |
| Where to check current terms | Your existing BBL lender + gov.uk | British Business Bank + accredited lender |
When to Focus on Managing Legacy BBL Debt First
- Your business is struggling with existing Bounce Back Loan repayments and has not yet used all available Pay as You Grow options
- You want to avoid adding new debt on top of an unresolved cash flow problem
- You need to stabilise the business before a lender would consider further lending anyway
When Growth Guarantee Scheme Finance May Help
- Your legacy Bounce Back Loan is being managed sustainably and is not a barrier to further borrowing
- You have a specific growth opportunity or working-capital need that a commercial lender assesses as viable
- You can meet an accredited lender's normal credit criteria, since the guarantee is partial, not automatic approval
Frequently Asked Questions
What is Pay as You Grow and is it still available on Bounce Back Loans?
Pay as You Grow (PAYG) is the set of repayment flexibility options the government required lenders to offer on Bounce Back Loans, including extending the loan term (up to 10 years total), moving to interest-only payments for a period, or taking a repayment holiday. If you still have an outstanding Bounce Back Loan and are struggling with repayments, contact your lender to check what PAYG options remain available to you β availability and specific terms are set by your individual lender, so check with them and gov.uk directly.
What is the Growth Guarantee Scheme?
The Growth Guarantee Scheme is the successor to the Recovery Loan Scheme, providing a government guarantee to lenders on new finance (loans, asset finance, invoice finance and overdrafts) to smaller UK businesses to support cash flow and growth. Unlike the Bounce Back Loan Scheme, it is not a 100%-guaranteed, standardised product β the guarantee percentage, interest rate and terms are set by the accredited lender's normal commercial credit assessment process, so approval is not automatic. Check the British Business Bank's website and gov.uk for current accredited lenders and scheme parameters.
Can I get Growth Guarantee Scheme finance while I still owe on a Bounce Back Loan?
In principle, yes β an outstanding Bounce Back Loan does not automatically disqualify a business from applying for Growth Guarantee Scheme finance, but the lender will assess your overall existing debt burden, cash flow and creditworthiness as part of normal commercial lending criteria. If your legacy Bounce Back Loan repayments are already under strain, lenders are less likely to extend further guaranteed finance until that position improves β always check with the specific accredited lender.
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What happens if I cannot repay my Bounce Back Loan at all?
If PAYG options are exhausted and the business genuinely cannot repay, options depend on your business structure β a limited company facing insolvency should take advice from a licensed insolvency practitioner about routes such as voluntary liquidation, while sole traders/partnerships (who gave a personal guarantee is not typically required on standard Bounce Back Loans under Β£50k for sole traders, but always check your specific facts) face different personal exposure. Do not ignore lender communications β engaging early typically preserves more options than defaulting silently. Speak to your lender and, if needed, a debt advice charity or insolvency practitioner.
Which route is better β restructuring legacy debt or taking new finance?
This depends entirely on your business's cash flow and growth plans. If the priority is stabilising an existing cash flow problem, using Pay as You Grow options on the Bounce Back Loan first is usually the lower-cost, lower-risk step, since it does not add new debt. If the business has a genuine growth opportunity requiring capital and the existing legacy debt is manageable, Growth Guarantee Scheme finance may be worth exploring β but taking on new borrowing on top of unresolved legacy debt increases overall risk, so get independent advice before committing either way.
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Disclaimer: This comparison is general information, not financial advice. Scheme terms, lender criteria and guarantee percentages can change β always check gov.uk, the British Business Bank and your own lender for current terms before making a decision.