The Chancellor has announced that businesses which took out government-backed Bounce Back Loans will now have greater flexibility to repay their loans.
Those who took out bounce back loans as a result of the covid-19 pandemic will now have the option to delay all repayments for a further 6 months, thanks to the ‘Pay as You Grow’ scheme. This scheme will be available to over 1.4 million businesses which, collectively, took out nearly £45 billion in bounce back loans.
The ability to further delay repayments will mean that borrowers will have been able to not make any payments on their loans until 18 months after originally taking them out. The option to pause repayments will now be available to all from their first repayment, rather than after six repayments have been made.
Additionally, the chancellor is not only delaying the repayments but is also giving borrowers the option to half their payments once they begin. This is because, Pay as You Grow will now allow borrowers to extend the loan from six to ten years and only make interest payments for the additional six month extension period. This is very generous from the government, considering that they have paid the costs of interest for the first 12 months since the bounce back loans were taken out.
Rishi Sunak said: “Businesses are continuing to feel the impact of extended disruption from Covid-19, and we’re determined to give them the backing and confidence they need to get through the pandemic.
That’s why we’re giving Bounce Back Loan borrowers breathing space to get back on their feet, through greater flexibility and time to repay their loans on their terms.
Lenders will proactively and directly inform their customers of Pay as You Grow, and borrowers should only expect correspondence three months before their first repayments are due.
It will provide businesses with the following options:
- Extend the length of the loan from six years to ten
- Make interest-only payments for six months, with the option to use this up to three times throughout the loan
- Pause repayments entirely for up to six months”
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