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 today.
The Treasury’s 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 ten 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 now 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 a total of nearly £45 billion
through the Bounce Back Loan Scheme.
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.
This will provide more time and greater flexibility to repay the
loans.
From today, lenders will begin reaching out to borrowers to
provide information on repayment schedules and how to access
flexible repayment options.
The Chancellor of the Exchequer, , 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.
Business Secretary, , added:
“The comprehensive and generous financial support package we have
delivered across the UK has protected jobs, saved businesses and
kept local economies on the move.
“While our vaccine rollout is moving at an incredible pace and
the end is in sight, we know times are still tough for many
companies and extra support is needed.
“These flexible repayment options will give businesses the time
they need to recover from the pandemic before paying back loans,
giving them the breathing space and confidence to build back
better.”
Further Information
The British Business Bank run the Bounce Back Loan Scheme.
The government has made clear that lenders are expected to offer
PAYG options to all borrowers under the Bounce Back Loan Scheme.
Following discussions with lenders, all borrowers should receive
identical information on PAYG being offered.
The Financial Conduct Authority’s conduct rules require lenders
to show due consideration and appropriate forbearance to
borrowers in difficulty.
Under the Bounce Back Loan Scheme, no repayments or interest are
due from the borrower during the first 12 months of the loan
term.
Summary of existing support can be found here:
https://www.gov.uk/government/publications/summary-of-existing-economic-support
