Through the Pay as You Grow scheme, businesses that took out government-backed Bounce Back Loans to help survive the impact of COVID-19 will now have greater flexibility to repay their loans.

This comes as the Pay as You Grow scheme (PAYG) is extended, giving an option that will allow businesses to delay all repayments for a further six months.

The PAYG scheme will be available to over 1.4 million businesses, which collectively took out nearly £45bn through the Bounce Back Loan Scheme.

Under the Bounce Back Loan scheme, run by the British Business Bank, small and medium sized businesses can apply for loans, worth up to 25% of their turnover, of between £2,000 and £50,000. The loan is 100% government guaranteed, with no repayments or interest due from the borrower during the first 12 months of the loan term.

Businesses began to receive loans in May 2020 and the first repayments will become due in May 2021.

Initial Pay as You Grow guidance

First announced in September 2020, PAYG was introduced to allow borrower’s to tailor repayments to their individual circumstances, providing more time and flexibility to repay loans.

Under the scheme, businesses had the option to:

  • Extend the length of the loan from six years to 10, halving the average monthly repayment.
  • Make interest-only payments for six months, with the option to use this up to three times throughout the loan.
  • Pause repayments for up to six months after having made six repayments, which can only be used once.

What has changed?

The Chancellor has now extended the third option, allowing borrowers to pause repayments entirely for up to six months without having made any repayments previously. This will mean that businesses can choose to make no payments on their loans until 18 months after they originally took them out.

The government has made clear that lenders are expected to offer PAYG options to all borrowers under the Bounce Back Loan Scheme.

Our COVID-19 support hub also provides details of other government backed loan schemes which are currently available, having been extended until March 2021.