Bounce Back Loans to offer flexible repayment terms with Pay as You Grow (PAYG)

Bounce Back Loans that were taken out by businesses impacted by COVID-19 now have the flexibility to make no repayments on their loans until 18 months after they originally took them out. Previously this option was only available after six repayments had been made.

On 6 February 2021, the British Business Bank published further details of the Pay as You Grow scheme. The Pay as you Grow scheme was originally announced by the Chancellor in September 2020, extending the maximum length of the loans from six years to ten, as well as providing additional interest-only periods of up to six months and a payment holiday.

Under the details of the Pay as You Grow measures, businesses with Bounce Back Loans are now able to:

  • Request an extension of their loan term up to 10 years (previously the maximum term was 6 years) at the same fixed interest rate of 2.5%
  • Pay interest only for six months. This is available up to three times during the term of the loan and is in addition to the first 12 months, where the interest is covered by the Government
  • Request a repayment holiday of up to six months, which is available once during the life of the loan

These options can be used by borrowers individually or combined at the same time.  Borrowers remain responsible for repaying their Bounce Back Loan and are fully liable for their debt.

Bounce Back Loans – increased flexibility in the additional six-month payment holiday

Flexibility of the third option has now been extended by the Chancellor. It will now be available to all borrowers from their first repayment, rather than after six repayments have been made. Businesses therefore can choose to make no payments on their loans until 18 months after they originally took them out.

Lenders will be communicating these Pay as you Grow options directly to borrowers three months before repayments are due to commence. The Government advises borrows to wait until they are contacted by their lender before enquiring about the scheme.

The first Bounce Back Loans were received by businesses in May 2020, with the first repayments due on these from May 2021. These businesses should be receiving details of the Pay as you Earn scheme from borrowers imminently.

These Pay as You Grow options are available to the 1.4 million businesses who took out a Bounce Back Loan with circa £45 billion being provided as loans to businesses through the scheme.

Further Information

The Bounce Back Loan Scheme is run by the British Business Bank. Further information is available on their website here.

The Financial Conduct Authority’s (FCA) conduct rules require lenders to show due consideration and appropriate forbearance to borrowers in difficulty. Further information from the FCA has been published on their website here.

Further information on support measures for businesses impacted by COVID-19 can be found on our Coronavirus Information Hub.

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