Under the original Pay As You Grow (PAYG) facility, first announced by Chancellor Rishi Sunak in September last year, borrowers would be able to tailor their repayment schedule, with the option to extend the length of their loans from six to 10 years; make interest-only payments for six months; or pause repayments for up to six months.
However, the Chancellor has now extended the flexibility for borrowers wishing to take a repayment holiday, allowing them to do so 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.
However, it will be the only repayment holiday borrowers are able to take under the scheme.
The option to reduce their monthly repayments for six months by paying interest only will be available up to three times during the term of their Bounce Back Loan.
Borrowers can decide to take advantage of the different repayment options available to them individually, or in combination with each other.
“Pay As You Grow will provide tangible benefits to Bounce Back Loan recipients, many of whom may have accessed the Bounce Back Loan Scheme to borrow money for their business for the first time," says Richard Bearman, managing director of small business lending for the British Business Bank, which runs the Bounce Back Loan scheme.
"The scheme offers greater flexibility to businesses who may need flexibility in paying off their Bounce Back Loan and enables them to manage their repayments more effectively.”
Businesses first began to receive Bounce Back Loans, which give small businesses guaranteed access to loans worth 25% of turnover up to £50,000, in May 2020 and the first repayments will become due from May 2021 onwards.
Trade body UKHospitality, which has been making repeated calls for the Government to do more to support businesses, has welcomed the announcement.
"[This] will give valuable breathing space for many hospitality businesses," says chief executive Kate Nicholls.
"The overwhelming majority are under huge pressure after months of little or no income, with cash fast running out and an ever-increasing debt pile as a result of prolonged periods of closure.
"Whilst this does provide relative respite for some, it’s important that banks are as flexible as possible in allowing hospitality businesses to access better terms and follow through with this announcement. Government has a role to play if this is not seen to be taking place."
“The survival of thousands of businesses and the ability of the hospitality sector to play a full part in the nation’s economic recovery hangs in the balance.
"What’s urgently required is a clear roadmap to reopening, a solution to the ongoing rent debt issue that continues to cast a huge shadow over the sector, along with an extension of the business rates holiday and VAT cut.
"These measures will help give hospitality a fighting chance to get through this crisis, to grow and create jobs once again.”