Firms given extra six months to repay COVID loans

Businesses that took out government-backed Bounce Back Loans can delay the start of their repayments by an extra six months.

The loan scheme was announced in April last year and allowed small firms to apply for up to 25 per cent of their turnover, to a maximum of £50,000. Under the scheme, the Treasury provides a 100 per cent guarantee for lenders and covered fees and interest for the first year. Repayments were originally due to begin after 12 months of receiving the loan, to be paid within six years. In September, this was extended further by chancellor Rishi Sunak, to allow repayments to be made over the course of 10 years.

Yesterday, Sunak announced that borrowers will now have the option to make no repayments on their loan until 18 months after they originally took them out. An option to pause repayments is now also available to all firms from the first instalment of their repayments, rather than after six repayments have been made, as was originally the case.

In October, Construction News reported that construction companies have taken on more emergency loans that any other sector.

Further flexibility on the loans, announced yesterday, include the option to tailor repayments according to a company’s individual circumstances, through an initiative called ‘Pay as You Grow’. This will mean government covers the costs of interest for the first year of the loan, and will allow borrowers to make interest-only payments for the six months following that.

Lenders will begin reaching out to firms today to provide information on repayment schedules and how to access flexible payment options. All firms will be contacted three months before their first repayments are due, the Treasury said.

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.”

Business secretary Kwasi Kwarteng added: “While our vaccine rollout is moving at an incredible pace and the end is in sight, we know times are still tough for many companies and extra support is needed. These flexible repayment options will give businesses the time they need to recover from the pandemic before paying back loans, giving them the breathing space and confidence to build back better.”