New Pay As You Grow facility will allow more flexible repayments on Bounce Back loans for UK small businesses – Retail Times

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The British Business Bank, the UK’s economic development bank, today announced more details on Pay As You Grow, which helps UK small businesses that have taken out a Covid-19 emergency bounce loan manage their cash flow and have a better chance of recovering. to growth.

Originally announced by the Chancellor of the Exchequer in September 2020, Pay As You Grow (PAYG) will allow businesses that have started repaying their Bounce Back loans to:

  • ask for an extension of the term of their loan to 10 years instead of six years, at the same fixed interest rate of 2.5%
  • reduce their monthly payments for six months by paying only interest. This option is available up to three times during the term of their Bounce Back loan.
  • take repayment leave of up to six 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[1], and remain responsible for repaying their Bounce Back loan and fully responsible for the debt.

Lenders will begin communicating Pay As You Grow (PAYG) options to Bounce Back loan program borrowers three months before repayments begin. Lenders will directly inform their customers about PAYG. Borrowers should therefore wait to be contacted by their lender before inquiring about the program. Lenders will let clients know how their payment profiles may change based on their choices under the program. Businesses started receiving BBLS loans in May 2020 and the first repayments will become due from May 2021.

Richard Bearman, Managing Director of Small Business Loans, British Business Bank, said: “Pay As You Grow will provide tangible benefits to Bounce Back loan recipients, many of whom may have accessed the Bounce Back loan program to borrow money for their business for the first time. The program provides greater flexibility for businesses that may need flexibility to repay their Bounce Back loan and allows them to manage their repayments more effectively.

Business Secretary Kwasi Kwarteng said: “The comprehensive and generous financial support program we have provided across the UK has protected jobs, saved businesses and kept local economies moving.

“As the rollout of our vaccines progresses at an incredible rate and the end is in sight, we know times are still tough for many companies and more support is needed.

“These flexible repayment options will give businesses the time they need to recover from the pandemic before repaying their loans, giving them the space and confidence to rebuild better.”

Stephen Pegge, Managing Director of Commercial Finance at UK Finance, said: “The UK banking and financial sector is providing an unprecedented level of support to UK businesses to help them weather the crisis and prepare for the recovery. Almost 1.5 million businesses have benefited from a Bounce Back Loan (BBL) since the program launched last May.

“While the outlook for many businesses remains challenging, the flexibility of Pay As You Grow will help small businesses manage their cash flow and repayments. Lenders will contact BBL borrowers before their first payments to present their options.

Government guaranteed loans are just one part of the sector’s broader support for businesses alongside commercial lending, principal offsets, extended overdrafts and asset-based finance, which means there is a range of aids available to any business that needs it. “

Dr Adam Marshall, Managing Director of UK Chambers of Commerce, said: “The Bounce Back loan program has been an important lifeline for many small businesses during the pandemic.

“While many businesses still face dwindling cash flow, the flexibility offered by Pay As You Grow has a crucial role to play in providing businesses that have received a Bounce Back loan the flexibility to manage their business. repayments during this continuing economic storm.

“Chambers of commerce across the country will ensure that businesses in their local communities are aware of the Pay As You Grow program. “

Chris Wilford, Head of Financial Services Policy, CBI, said: “Pay As You Grow will provide vital support to many businesses that hope to transition from survival mode to recovery mode when the economy gradually reopens. “

“The combination of payment extensions, discounts and time off gives companies significant flexibility in managing tight cash flow. “

“Businesses have been enthusiastic about the government’s financial support program throughout, with secured loans providing a lifeline to over 1.5 million businesses so far. “

FSB National Vice President Martin McTague said, “With early loan repayments rebounding amid continued restrictions, it is critical that small businesses are aware of all of their options. As such, it is good to see efforts to expand understanding and access to Pay As You Grow plans.

“These should help many small businesses keep their debt manageable as they fuel our recovery from an incredibly deep recession. Ultimately, the rebound facilities were made possible by the government as part of efforts to help us navigate a national crisis. Lenders should be aware of this fact and treat borrowers accordingly in the months to come. “

The Bounce Back Loan Program was launched on May 4, 2020. It provides financial support to UK businesses that are losing income and seeing their cash flow disrupted due to the Covid-19 pandemic. Since May 2020, the program has supported nearly £ 45bn in loans to 1.5m businesses.

Businesses can apply for a £ 2,000 loan for up to 25% of their business’s turnover, with a fixed interest rate of 2.5% for the life of the loan, meaning all borrowers benefit the same affordable interest rate. The maximum loan amount is £ 50,000 and the government will provide a Business Interruption Payment (PIF) to cover the first 12 months of interest payments. The borrower does not have to make a repayment for the first 12 months.

Businesses with concerns about paying off their debts should contact their lender and can find additional links to resources on the British Business Bank’s Finance Hub.

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