Businesses that took out government-backed Bounce Back Loans to get through Covid-19 will now have greater flexibility to repay their loans, the government has announced
Bounce Back Loan borrowers will now have the option to tailor payments according to their individual circumstances with the option to delay all repayments for a further six months.
Pay as You Grow (PAYG) will be available to over 1.4 million businesses, which collectively took out nearly £45bn through the Bounce Back Loan Scheme.
The Pay as You Grow repayment flexibilities enable borrowers to tailor their repayment schedule, with the option to extend the length of their loans from six to 10 years (reducing monthly repayments by almost half), make interest-only payments for six months or pause repayments for up to six months.
The Chancellor has extended the flexibility of the third option, which will now be available to all from their first repayment, rather than after six repayments have been made. This will mean that businesses can choose to make no payments on their loans until 18 months after they originally took them out.
These Pay as You Grow options will be available to more than 1.4 million businesses which took out the Bounce Back Loan Scheme. Businesses first began to receive the loans in May 2020 and the first repayments will become due from May 2021 onwards.
This is in addition to the government covering the costs of interest for the first year of the loan.
Pay as You Grow’s additional support, first announced by the Chancellor in September, will give borrowers the option to tailor repayments to their individual circumstances.
The government has confirmed that lenders will reach out to borrowers to provide information on repayment schedules and how to access flexible repayment options.
It will provide businesses with the following options:
- extend the length of the loan from six years to 10 at the same fixed interest rate of 2.5%;
- make interest-only payments for six months, with the option to use this up to three times throughout the loan; and
- pause repayments entirely for up to six months. This option is available once during the term of the Bounce Back Loan.
The British Business Bank runs the Bounce Back Loan Scheme. The government has made clear that lenders are expected to offer pay as you go options to all borrowers under the Bounce Back Loan Scheme.
Under the Bounce Back Loan Scheme, no repayments or interest are due from the borrower during the first 12 months of the loan term.
If you require any further information on the Bounce Back Loan Scheme then please get in touch with the office.