Businesses that took out government-backed Bounce Back Loans to get through Covid-19 will now have greater flexibility to repay their loans, benefiting small and independent agencies, as well as suppliers servicing the property industry.
The chancellor announced on Monday (8 February) that the new Pay as You Grow repayment flexibilities of the Bounce Back Loans include the option to delay all repayments for a further six months, meaning businesses can choose to make no payments on their loans until 18 months after they originally took them out.
Borrowers will now be able to pause repayments from their very first repayment, rather than after six repayments have been made. In addition, Pay as You Grow will enable borrowers to extend the length of their loans from six to 10 years (reducing monthly repayments by almost half) and make interest-only payments for six months, enabling borrowers to tailor their repayment schedule to suit their individual circumstances with more time and greater flexibility to repay the loans. The government will continue to cover the costs of interest for the first year of the loan.
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.
Pay As You Grow will provide borrowers with the following options:
- Extend the length of the loan from six years to 10.
- 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.
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.”