UK government has extended the Bounce Back Loan repayment terms for a further six months.
Bounce Back Loan borrowers will now have the opportunity to make payments according to their individual circumstances. They now have the option to delay all repayments for a further six months.
Pay as You Grow will be available to over 1.4 million businesses. It collectively took out nearly £45bn through the Bounce Back Loan Scheme.
The Treasury’s Pay as You Grow repayment flexibilities enable borrowers to tailor their repayment schedule. They now have the option to extend the length of their loans from six to 10 years (reducing monthly repayments by almost half). Further, they can also 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. This 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.
Businesses first began to receive the loans in May 2020 and the first repayments will become due from May 2021 onwards.
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.
The government has confirmed that lenders will reach out to borrowers to provide information on repayment schedules and how to access flexible repayment options.
Chancellor 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.’
Thus, lenders will proactively and directly inform their customers of Pay as You Grow. However, the 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 10 at the same fixed interest rate of 2.5%;
- 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. This option is available once during the term of the Bounce Back Loan.