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We had a tip off that an announcement was due on today (8 Feb) with details of the “Pay as you Grow” (PAYG) scheme for Bounce Back Loans, but it would appear that the Chancellor could not wait and a press release was made on Friday night which was picked up by a lot of media sources. This has been followed up today (8 Feb) with a news release on GOV.UK.
I am not sure they have added a great deal to what we already know about main elements of PAYG – apart from an indication as to when and how business may be able to access the ‘flexible repayment options’.
Pay as you Grow was, I think, first mentioned back in September as part of the Winter Economy Plan. I have summarised what we blogged at the time compared to what was in yesterday’s press release:
|Details released in September 2020||Details released 8 February 2021|
|Loan period extension||Loans can now be extended from six to ten years.
|Loans can now be extended from six to ten years at the same fixed interest rate.|
|Suspension of capital repayments||to move temporarily to interest-only payments for periods of up to six months (an option which they can use up to three times)||to move temporarily to interest-only payments for periods of up to six months (an option which they can use up to three times)|
|Suspension of capital and interest payments||to pause their repayments entirely for up to six months (an option they can use once and only after having made six payments)||to pause their repayments entirely for up to six months (an option they can use once and only after having made six payments)|
|Credit rating||No business taking up Pay as you Grow will see their credit rating affected as a result
|Time from taking out the loan to making the first payment||to allow firms to opt for an additional six-month buffer before their first payment is due.|
It appears, borrowers can use these options individually or in combination with each other.
How are businesses to access Pay as you Grow?
- “The government has made clear that lenders are expected to offer PAYG options to all borrowers under the Bounce Back Loan Scheme”;
- “… all borrowers should receive identical information on PAYG being offered”
- “Lenders will proactively and directly inform their customers of Pay as You Grow”
- “businesses [are advised] to wait to be contacted and follow the instructions, rather than getting in touch with their bank themselves, as banks would struggle to cope with such call volumes”
- “Borrowers should only expect correspondence three months before their first repayments are due”
Should any further details become available, we will update this blog.