22 February 2021

The government has announced greater repayment flexibility under its Pay As You Grow scheme for businesses that took out Bounce Back Loans.

Following pressure from Labour and business groups to increase coronavirus support for businesses, Chancellor Rishi Sunak has expanded the Bounce Back Loan Scheme’s (BBLS) Pay As You Grow repayment plan:

  • BBLS borrowers can now tailor payments according to individual circumstances
  • Businesses can delay all repayments for a further six months and extend their loan term
  • Pay as You Grow will be available to over the 1.4 million businesses that took out nearly £45bn in BBLS

Delayed repayments

Businesses can now opt out of making payments on BBLS loans until 18 months after they originally took them out. The option to pause repayments will now be available to all from their first repayment, rather than after six repayments have been made.

Extend loan term

Pay as You Grow now allows loan-holders to extend the length of BBLS loans from six to ten years, and reduce monthly repayments by nearly 50%. The updated scheme also means businesses can make interest-only payments for six months, in a bid to tailor the scheme to match individual business needs.

“These flexible repayment options will give businesses the time they need to recover from the pandemic before paying back loans, giving them the breathing space and confidence to build back better,” said Business Secretary Kwasi Kwarteng.

Businesses will not have to pay any interest for businesses to pay in the first 12 months of taking out the Bounce Back Loan Scheme.

Lenders ordered “to show due consideration and appropriate forbearance”

According to GOV.UK, lenders will proactively and directly inform their customers of Pay as You Grow from this week, and borrowers should only expect correspondence three months before the first repayment is due.

All businesses will be offered 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

GOV.UK also states:

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

Following discussions with lenders, all borrowers should receive identical information on PAYG being offered.

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

Under the Bounce Back Loan Scheme, no repayments or interest are due from the borrower during the first 12 months of the loan term.”