Government gives Bounce Back Loan “breathing space”

Published:  08 February, 2021

Garages that have taken out loans under the government’s Coronavirus  business bounce back scheme can now spread the repayment period, via “pay-as-you-grow” measures announced by Chancellor of the Exchequer Rishi Sunak on Friday (5 February).

The new option means businesses can now lengthen loans taken out under the Bounce Back Loan Scheme from six to 10 years. According to the Chancellor, the change means businesses  will be given “breathing space” to get back on their feet.”

Around 1.4 million small businesses across the spectrum have taken up the loans, and between them they have so far borrowed around £45 billion. The scheme enables firms to borrow between £2,000 and up to 25% of their turnover, up to a maximum of £50,000. The loans are guaranteed by government with no fees to pay or interest for the first year. After one year, interest is 2.5% per year. The scheme is open until 31 March.

As well as extending the repayment period, under the new rules, businesses will be able to make interest-only repayments for six months, something they will be able to do three times during the repayment. They will also be able to suspend repayments entirely for up to six months.

Describing the loans as enabling companies to "pay-as-you-grow", The Chancellor said they have been made more flexible to help businesses through uncertain times: "Businesses are continuing to feel the impact of extended disruption from Covid-19, and 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."

Banks will be contacting businesses that took out the loans to detail the new possibilities offered by the increased flexibility.

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