Bounce Back ‘Pay as you grow’ option announced
The Treasury has now confirmed the details around the ‘Pay as you Grow’ announcement for Bounce Back loans, made by Chancellor Rishi Sunak. Businesses who have taken out Bounce Back loans now have greater flexibility around repayments.
The Pay as you Grow flexibilities allow borrowers to adjust their repayment schedule to better suit their business situation.
- They now have the chance to extend their loans from six to ten years at the same interest rate, which could almost halve the monthly repayments.
- They can make interest only payments for six months, up to three times within the repayment schedule.
- They can choose to pause repayments for up to six months. There is only one chance to take a six month repayment holiday within the term of the loan.
This last option was already in place, but a minimum of six monthly payments had to have been made before the payment holiday could start. This is no longer required, allowing businesses up to 18 months after drawing funds before they need to start their repayments.
The Government will still cover the interest costs of the loans for the first year of the loan.
This enhanced flexibility will benefit up to 1.4 million businesses who have borrowed nearly £45billion through the Bounce Back Loans since they were launched in May 2020.
How will this work?
Lenders will contact all borrowers to let them know the options they have, but this is likely to be received in the three months before the first scheduled payment due date.
They will proactively 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
As the first loans under the scheme were made in May 2020, the first repayments won’t be due until May 2021.
If you were one of the first recipients of funds through the scheme, you may wish to speak to your lender if you haven’t already heard from them towards the middle of March. Realistically, they are unlikely to have their policies and processes in place before the end of February.
As ever, if you’d like to talk through the best option for your business, please get in touch.
Business Updates
We send regular updates that keep clients aware of changes and suggestions on a wide range of subjects; if you’d like to receive those too, just add your details below and we’ll do the rest! We promise not to bombard you and you can unsubscribe at any time.
