Firms get 10 years to repay Covid ‘bounce back’ loans

CHANCELLOR Rishi Sunak said he wants to provide “breathing space” for businesses struggling during the pandemic by giving them more time to make the first repayment on Government support loans.

The Treasury had announced “pay as you grow” flexible terms in September to the 1.4 million firms who took out £45billion worth of “bounce back” loans. The new offer includes giving them the option of paying the total back over 10 years rather than six, and allowing them to choose to pay only the 2.5 per cent interest.

Extending repayments to 10 years would allow companies that took the maximum £50,000 loan to reduce their monthly bill from around £940 to approximately £460.

Mr Sunak has also agreed to let firms opt for an additional six-month buffer before their first payment is due.

Back in the autumn he had said that businesses could pause repayments for half a year but only after six contributions had been made.

It means that, along with the initial 12-month interest and repayment holiday, businesses who took the loans will have 18 months before having to start paying back what they owe. Mr Sunak said: “Businesses are continuing to feel the impact of 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.”

Banks will write to the more than 600,000 businesses that borrowed nearly £20billion between them in May, when the scheme first opened, to provide information on how to access the flexible repayment options.

Richard Bearman of the British Business Bank advised borrowers to wait to be contacted rather than flood banks’ phone lines.

Business Secretary Kwasi Kwarteng said: “These flexible options will give businesses the time they need to recover before they repay.”

But Labour said the changes were “minor tweaks to a policy already more than 20 weeks old”. Shadow chief secretary to the Treasury Bridget Phillipson said of Mr Sunak: “He’s clearly out of ideas when it comes to supporting hard-pressed businesses.”

‘We’re giving them breathing space to get back on their feet’