Can't Pay, Don't Pay - Chancellor Makes Loans Pay As You Grow

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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 on 8 February.

Bounce Back Loan borrowers will now have the option to tailor payments according to their individual circumstances

Chancellor Rishi Sunak has made support even more generous with the option to delay all repayments for a further six months.

Pay as You Grow will be available to over 1.4 million businesses, which collectively took out nearly £45 billion through the Bounce Back Loan Scheme.

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.

This is in addition to the government covering the costs of interest for the first year of the loan.

From 8 February, lenders will begin reaching out to borrowers to provide information on repayment schedules and how to access flexible repayment options.

Chancellor Sunak, said: "Businesses are continuing to feel the impact of extended disruption from Covid-19. 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."

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.

Further Information

The British Business Bank run the Bounce Back Loan Scheme.

The government has made clear that lenders are expected to offer PAYG options to all borrowers under the Bounce Back Loan Scheme.

The Financial Conduct Authority’s conduct rules require lenders to show due consideration and appropriate forbearance to borrowers in difficulty.

Picture: Chancellor Rishi Sunak.

Article written by Cathryn Ellis
10th February 2021

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