Update 9 February 2021 COVID-19 Bounce Back Loan repayment period extended
The Government has announced changes to the Bounce Back Loan Scheme (BBLS) available to small businesses in the UK that will give companies longer to repay what they have borrowed.
Around 1.4 million small and medium-sized businesses have taken out a loan since they were introduced last year, amounting to around £45 billion of financial support.
Under the current scheme, firms get interest-free loans for the first year. However, many businesses that took out a loan last year will have to begin repaying the money lent to them in May.
With large parts of the country likely to remain in lockdown for many weeks to come, the Government is making changes to its existing ‘Pay as you Grow’ (PAYG) initiative that are designed to give small businesses greater support to repay their loan, without it adversely affecting their recovery.
Under the new arrangements, businesses will have the option to:
- Extend the length of the loan from six years to 10
- Make interest-only payments for six months, with the option to use this up to three times during the life of the loan
- Pause repayments entirely for up to six months.
The Treasury has said that the PAYG scheme gives borrowers the flexibility to tailor their repayment schedule to meet the needs of their business.
The initiative will now be available to all borrowers from their first repayment, rather than after six repayments have been made.
This will mean that businesses can choose to make no payments on their loans until 18 months after they originally took them out.
Applying for a Bounce Back Loan
Although the Government is already looking at how existing borrowers can repay the money that they have borrowed, the BBLS remains open to new claims until the end of March.
It enables small and medium-sized businesses to borrow between £2,000 and up to 25 per cent of their turnover (capped at £50,000).
The BBLS is 100 per cent backed by the Government, which means that only minimal checks are required by lenders. Following the first interest-free year, a fixed interest rate of 2.5 per cent a year applies.
If you already have a loan but borrowed less than you were entitled to, you can still top up your existing loan to your maximum amount.
Businesses that intend to use the BBLS must make an application or top up an existing loan by 31 March 2021.
If you haven’t yet made an application for the scheme or would like help with the PAYG scheme, please contact your Seymour Taylor representative or email@example.com 01494 552100.