Bounce Back Loans
New Pay As You Grow Scheme gives more flexible repayments methods for businesses
The British Business Bank, the UK’s economic development bank, recently announced further details of Pay As You Grow (PAYG), which helps UK smaller businesses that have taken out a Covid-19 emergency Bounce Back Loan to manage their cash flow and have a better chance of getting back to growth.
Originally announced by the Chancellor of the Exchequer in September 2020, PAYG will enable businesses that have started repaying their Bounce Back Loans to:
- Request an extension of their loan term to 10 years from 6 years, at the same fixed interest rate of 2.5%;
- Reduce their monthly repayments for 6 months by paying interest only. This option is available up to 3 times during the term of their Bounce Back Loan;
- Take a repayment holiday for up to 6 months. This option is available once during the term of their Bounce Back Loan.
Borrowers can use these options individually or in combination with each other.
Lenders will start to communicate Pay As You Grow (PAYG) options to Bounce Back Loan Scheme borrowers 3 months before repayments commence. Lenders will inform their customers about PAYG directly, so borrowers should wait until their lender contacts them before enquiring about the scheme. Lenders will advise customers about how their payment profiles may change according to their choices under the scheme.
Businesses first began to receive these loans in May 2020, and the first repayments will become due from May 2021 onwards.