Businesses that took out government-backed Bounce Back loans to get through the coronavirus (COVID-19) pandemic will now have greater flexibility to repay their loans, the government has announced.
The Pay as You Grow repayment flexibilities now include the option to delay all repayments for a further six months. This means businesses can choose to make no payments on their loans until 18 months after they originally took them out.
Pay as You Grow will also enable borrowers to extend the length of their loans from six to ten years, which reduces monthly repayments by almost half.
They can also make interest-only payments for six months to tailor their repayment schedule to suit their individual circumstances.
The 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 (BBLS).
The Chancellor of the Exchequer, 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.’
The Bounce Back Loan Scheme (BBLS) has provided support to many UK-based small businesses. Loans are between £2,000 and £50,000, capped at 25% of turnover, with a 100% government guarantee to the lender. The borrower does not have to make any repayments for the first 12 months, with the government covering the first 12 months’ interest payments. Under a Pay as you Grow scheme businesses will have options to:
- repay their loan over a period of up to ten years
- move temporarily to interest-only payments for periods of up to six months (an option which they can use up to three times)
- pause their repayments entirely for up to six months (an option they can use once and only after having made six payments).
Coronavirus Business Interruption Loan Scheme
The Coronavirus Business Interruption Loan Scheme provides loan facilities to UK-based businesses with turnover under £45 million. The scheme provides loans of up to £5 million with an 80% government guarantee to the lender. The government does not charge businesses for this guarantee and also covers the first 12 months of interest payments and fees.
The government has announced that as part of the Winter Economy Plan it intends to allow CBILS lenders to extend the term of a loan up to ten years.
The government is also extending the CBILS and BBLS to 30 November 2020 for new applications.
Applications for the Coronavirus Large Business Interruption Loan Scheme and the Future Fund will also be extended.
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