Businesses Will Have More Time To Pay Off Covid Loans, Says Rishi Sunak | Business

Businesses struggling during the pandemic must be given more time to make the first repayment of government support loans.

Chancellor Rishi Sunak said the movement was underway to give businesses more “breathing space”.

In September, the Treasury announced flexible ‘pay as you grow’ terms to 1.4 million businesses which took out £ 45 billion in ‘bounce back’ loans, which were a lifeline for many as profits plummeted due to coronavirus restrictions.

The new offer includes the ability to pay back the full amount over 10 years instead of six and allow them to pay only the 2.5% interest on the loans.

Sunak also announced in September that companies could withhold reimbursements for six months, but only after six contributions.

In a relaxation of that policy, he agreed to allow companies to opt for an additional six-month buffer before their first payment is due.

This means that in addition to the 12 months of initial interest and repayment, lenders – who were able to borrow a maximum of £ 50,000 – will have 18 months before they have to start repaying what they owe.

Sunak said, “Businesses continue to feel the impact of the protracted Covid-19 disruptions, and we are committed to giving them the support and confidence they need to navigate the pandemic.

“That’s why we’re giving rebound credit borrowers a break to get back on their feet, with more flexibility and more time to pay off their loans on their terms.”

The options were dragged on last year, but banks will soon write to the more than 600,000 companies that borrowed nearly £ 20bn from each other in May, when the program was first opened, to provide information on how to access flexible repayment options.

Business Secretary Kwasi Kwarteng said, “As our vaccine rollout advances at an incredible pace and the end is in sight, we know times are still tough for many companies and more support is needed. necessary.

“These flexible repayment options will give businesses the time they need to recover from the pandemic before repaying their loans, giving them the breathing space and confidence they need to rebuild better.

The Labor Party said the Chancellor’s latest changes were “minor changes to policy more than 20 weeks old”.

Shadow Chief Secretary to the Treasury Bridget Phillipson said: “He’s clearly short of ideas when it comes to supporting struggling businesses.

The government and the British Business Bank, which administers the rebound loans on its behalf, hope it will also ease some of the burden on businesses that may be struggling.

“A lot of businesses are undoubtedly doing well right now, but it’s clear that many are still under pressure,” Richard Bearman, general manager of small business loans at the bank, told the PA Media news agency. .

“I think knowing that you have support and that you have options gives this company the confidence to continue to fight through potentially difficult times to achieve growth.

Extending payment plans from six to 10 years could help businesses cut payments by hundreds of pounds a month.

This would allow a business that has taken out the maximum loan of £ 50,000 to reduce their monthly bill from around £ 940 to £ 460.

Companies will also be offered three six-month periods during which they only pay the interest on the loan, which will bring the bill down to around £ 100 per month for those who have taken out the maximum amount.

Dr Adam Marshall, Managing Director of the UK Chambers of Commerce, said: “The rebound loan program has been an important lifeline for many small businesses during the pandemic.”

He said flexibility had a “crucial role to play in providing businesses that received a rebound loan with much needed leeway to manage their repayments during this continuing economic storm.”