BBLS Pay As You Grow vs commercial refinance break-even calculator

What this calculates

Bounce Back Loans (BBLS) closed to new applications in March 2021 but the existing book is still material. Many UK SMBs are 5 to 6 years into a BBLS and approaching natural amortisation, with Pay As You Grow extensions still available. The decision question is whether to keep the BBLS at 2.5 percent fixed and use PAYG to manage the cashflow, or refinance the balance into commercial lending at 2026 rates. This page works through the break-even calculation: the rate-differential cost of refinancing versus the strategic value of the new facility.

The maths in plain English

The BBLS side. Take the current outstanding BBLS balance. Apply 2.5 percent fixed APR. Use the remaining term (original 6 years from origination plus any PAYG extension to 10 years total). Compute total remaining interest cost over the remaining term using the standard amortising-loan formula. This is what staying with BBLS will cost in cashflow terms.

The refinance side. Take the same BBLS balance plus any additional working-capital uplift you want from the refinance. Apply the achievable commercial APR (typically 8 to 14 percent for clean-credit applicants in 2026). Use the proposed refinance term (3 to 7 years is the typical UK SMB band). Compute total interest cost over the refinance term.

The differential. Subtract the BBLS-side cost from the refinance-side cost. The result is the explicit cashflow cost of refinancing. This is always positive on a rate-only comparison because 2.5 percent is below every commercial rate available.

The strategic value. Quantify what the refinance unlocks beyond the BBLS replacement. Three common drivers. First, additional working capital: model the margin on the additional revenue or cost-saving the new capital funds. Second, debt-stack consolidation: model the cost reduction from clearing higher-cost concurrent facilities (particularly stacked MCAs, see the blended cost of capital calculator). Third, balance-sheet capacity: model the value of removing the BBLS from the active scheme register and simplifying lender conversations.

The break-even. If quantified strategic value exceeds the differential cost over the refinance term, refinance breaks even. If not, keep BBLS and use PAYG to manage cashflow.

Worked example: pure cost refinance, no strategic value

Trading Ltd has a £30,000 BBLS balance with 4 years remaining at 2.5 percent fixed. Considering refinance into a £30,000 commercial term loan at 11 percent over 4 years. No additional working capital, no debt-stack consolidation. Pure cost-driven refinance.

BBLS-side cost. 4 years remaining at 2.5 percent on £30,000 amortising. Total interest cost approximately £1,540.

Refinance-side cost. 4 years at 11 percent on £30,000 amortising. Total interest cost approximately £7,200.

Differential. £7,200 minus £1,540 equals £5,660 over 4 years.

Strategic value. Zero on this scenario.

Verdict. Refinance loses £5,660 in cashflow over 4 years with no offsetting strategic value. Keep BBLS. Use PAYG (extend term, payment holiday or interest-only periods) if cashflow is the issue.

Worked example: refinance with new working capital

Trading Ltd has a £30,000 BBLS balance with 4 years remaining. Considering refinance into a £100,000 commercial term loan at 11 percent over 5 years. The new £70,000 of working capital funds inventory expansion expected to generate £25,000 a year of incremental gross margin.

BBLS-side cost (rate-differential portion only). The BBLS-replacement portion of the refinance is £30,000. Replacing 2.5 percent with 11 percent over 4 years (ignoring the term extension to 5) costs roughly £5,660 extra in interest, same as the pure-cost example.

Strategic value. £25,000 a year of incremental gross margin over 5 years equals £125,000 in undiscounted terms (typical SMB models discount this for risk and timing; even a 50 percent discount gives £62,500).

Verdict. Strategic value of £62,500 to £125,000 dwarfs the rate-differential cost of £5,660. Refinance breaks even comfortably. The BBLS replacement is a free rider on the working-capital expansion, not the main driver.

Worked example: refinance to consolidate stacked MCAs

Trading Ltd has a £30,000 BBLS balance plus £45,000 of MCA balances at blended 65 percent equivalent APR. Considering refinance into a £75,000 commercial term loan at 14 percent over 4 years (clean-credit applicant, but rate is at the higher end because of the stacked-MCA underwriting context).

BBLS-side cost (rate-differential portion). Replacing 2.5 percent with 14 percent on £30,000 over 4 years costs roughly £8,000 extra.

MCA-side saving. Replacing 65 percent equivalent APR with 14 percent APR on £45,000 (call it 12 months remaining MCA term, replaced by 4-year term loan): the MCA was costing roughly £29,250 a year in equivalent interest; the term loan cost on the same £45,000 is roughly £6,300 a year. Annual saving roughly £22,950, four-year saving roughly £91,800 (the MCAs would not have run for 4 years; treat the saving as front-loaded over the 12-month MCA tail).

Strategic value. Material. The MCA consolidation alone justifies the refinance several times over.

Verdict. Refinance breaks even hard. Specialist post-decline lenders ( Bizcap, JPM Capital, Bolton Finance) routinely structure exactly this trade.

When this number matters

The break-even matters at three trigger points. First, a BBLS borrower considering new lending in 2026: the question is "keep BBLS as is and add new commercial debt on top" versus "consolidate BBLS into a larger commercial facility". The break-even tells you which is cheaper. Second, a BBLS borrower running concurrent MCAs or other high-cost facilities: the consolidation case usually breaks even hard. Third, a BBLS borrower whose lender is offering accelerated repayment or a refinance pitch: the lender side has commercial reasons for moving the BBLS book; the borrower needs to test whether the refinance is genuinely in their interest.

Edge cases

BBLS in default or arrears. If the BBLS is already in default or arrears, refinance pricing reflects that. Mainstream commercial lenders may decline. Specialist routes engage but at materially higher rates. The break-even on a defaulted BBLS refinance is rarely favourable in pure cost terms; the case is usually about restructuring the debt to make repayment achievable, not optimising cost of capital.

Director with a director-loan-account problem. Some BBLS borrowers used the funds personally (drawn through the directors loan account). The BBLS itself is a company liability, but the underlying personal balance creates an S455 tax exposure. See the overdrawn DLA guide for the S455 implications and the routes to clear that exposure separately.

Group-restructure refinance. Refinancing a BBLS held by a now-restructured group (holdco set up after the BBLS was originated, trading subsidiary changed) has additional consent requirements. The originating lender consent and British Business Bank consent may be needed before the BBLS can be repaid under a non-standard structure. See holdco vs trading-co loan structures.

Bounce Back Loan misuse claims. Where the British Business Bank or the originating lender alleges BBLS misuse, the refinance conversation becomes legal not commercial. Get specialist advice before engaging refinance lenders.

BBLS plus Recovery Loan Scheme stack. Some borrowers hold both a BBLS and an RLS facility. The RLS is closed but existing facilities continue under their original terms (typically commercial-rate priced). Refinancing both together into a single commercial facility can simplify reporting and consolidate cost; check the RLS terms for early-repayment provisions.

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