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 announced today (8 February).
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, Rishi Sunak, said:
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, Kwasi Kwarteng, added:
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