News & Insights
The Chancellor of the Exchequer, Rishi Sunak, has announced that the state-backed loan scheme, designed to help small business bounce back from the crippling effects of the pandemic, will be modified to allow borrowers more time to repay the loan.
The news has come as a relief to the 1.4 million businesses who relied upon the loan, but who may now be in a weaker position to repay it than they were in April 2020. The extension of the payback period has been implemented to prevent company failures across the UK.
The value borrowed in bounce back loans, which can be for an amount of up to £50,000 per business, now totals almost £45 billion.
The government initially required these loans to start being paid back in May 2021. However, this was under the original plans for the scheme, at a time when many believed the UK would be well on the way to recovering from the pandemic by mid-2021.
The Chancellor’s new “pay as you grow” structure, will therefore extend the loans from six to ten years in length to reduce the monthly payments. Moreover, businesses will also be able to secure payment holidays or choose to only pay interest for a period of six months from May.
However, some bankers have predicted that this policy will keep thousands of business struggling under their pandemic-related debts for even longer.
With added pressure coming from the Labour party, and organisations representing businesses across all industries, many hope that this announcement precedes further positive news surrounding changes to the furlough scheme, rates relief and other packages of business support.