More ‘breathing space’ for Bounce Back Loan repayments

Businesses battling to survive the impact of the Covid-19 pandemic are to be given more time to repay their government support loans.

Chancellor Rishi Sunak has announced the greater flexibility, which he says will give businesses more “breathing space to get back on their feet”.

Around £45bn has been borrowed by more than 1.4 million small firms under the government’s Bounce Back Loan scheme, which offers loans of up to £50,000.

The Treasury announced “pay as you grow” flexible terms last September. The tweaks to the scheme that have now been announced will give companies the option to extend the length of their loan from six years to ten.

Business can also opt to make interest-only payments for six months, with the ability to use this facility up to three times throughout the loan.

They can also opt for an additional six-month ‘buffer’ before making their first payment.

That move means that, along with the initial 12-month interest and repayment holiday, businesses will have 18 months before having to start paying back.

The changes announced by the chancellor come as more than 600,000 companies that took advantage of the scheme when it first opened are due to start repaying their loans in May.

There have been growing concerns about the ability of some companies to pay back the money, with the economy still in a weakened position because of the ongoing impact of the pandemic.

Announcing the latest changes, Mr Sunak said: “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, which have been processing the loans, will begin contacting their customers this week to explain the new options available to them.

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