Pay As You Grow on Government loans

For many, it was a matter of when, not if, but the announcements by the Chancellor on Friday of further extensions of support under the BounceBack loan scheme have been widely welcomed by the business community.

The announcements include:

• A "pay as you grow" repayment scheme on BounceBack Loans
• The maximum repayment period to be extended from six to 10 years, nearly halving the average monthly repayment
• Interest only repayments to be allowed for up to three six-month periods, along with an entire suspension of payments for up to six months if needed
• The deadline for applications to remain 31 March 2021

Lenders will start to contact existing borrowers from today (8 February 2021) letting them know what their new options are.

The changes are in addition to the ability to spread the payment of VAT that was deferred in Q2 last year. Originally, this was due to be paid by 31 March 2021, facing most businesses with the prospect of a double VAT hit in the first part of the year. The Government confirmed last September that this deferral can be repaid over 12 months.

More than £45bn has been lent under the BounceBack Loan Scheme to 1.4m businesses so far, and with no fixed date in sight yet for the easing of lockdown restrictions imposed in the face of a second wave of coronavirus, business owners should be assessing whether or not they have the liquidity to carry them through into the summer. We recommend that you ask yourself:

1. Will a continuing period of lockdown with depressed revenues drain our reserves?
2. Did we take a BounceBack Loan earlier in the year believing it would be enough, but now face financial pressures again?
3. Would we benefit from extending the term or repayment profile of our BounceBack loan?
4. Could we do with a safety net, just in case?

If the answer to any of these questions is "yes", we recommend that you seriously consider applying for a new or restructured loan before the end of March when the schemes expire. Borrowing has never been available on such favourable terms and is unlikely to be repeated. Remember, if you take these loans out and ultimately don't need them, you can repay them at any time. Your business credit rating will also not be affected.

Contact us for further information and a confidential discussion about your requirements now.