Pay As You Grow
In May 2020, the Government launched the Bounce Back Loan Scheme (for more info check out our blog on BBLS - Deadline is on 31st March 2021). It gave businesses that were negatively affected by COVID-19 the opportunity to borrow between £2,000 and £50,000 depending on turnover. Interest is 2.5% per annum.
The loans were 100% guaranteed by the government. The original agreement was you did not have to make payments for the first 12 months and the length of the loan was 6 years however with the new “Pay As You Grow” (PAYG) scheme, this gives borrowers more flexibility with their repayments.
How Does Pay As You Grow Work?
It will enable businesses who are going to be repaying their Bounce Back Loans to:
- Request an extensions of their loan to 10 years from 6 years, at the same fixed interest rate of 2.5% (early payment can still allowed)
- Reduce their monthly repayments for 6 months by paying interest only. This option is available up to 3 times during the term of their Bounce Back Loan
- Take a repayment holiday for up to 6 months. This option is available once during the term of the Bounce Back Loan
The options can be used individually or in combination with each other and if so, there will be more interest to pay as the length of the loan is increased.
Am I Eligible?
PAYG is available to all businesses who have taken out a Bounce Back loan.
How do I access Pay as you Grow?
The government has told all accredited lenders that they should offer the Pay as you Grow scheme. The first repayment will become due in May 2021 onwards. You should expect to receive information about the options of PAYG from your lender three months before your first repayment is due.
Should I use Pay as you Grow?
It comes down to your circumstances, some business have been affected worse than others so might need to longer time to repay. If you do extend the time period then this will reduce the monthly repayments significantly.
If the payment breaks are opted for, then this will increase the monthly payments over the remaining period of time.
Where can I get more help and information?
You can find official information on the Bounce Back Loan scheme on the gov.uk website. If you have not yet taken out a loan, you have until 31st March 2021 to do so.
Lenders will inform their customers about PAYG directly, so borrowers should wait until they are contacted before enquiring about the scheme. You will be advised about how the repayments may change according to which options are taken.
We are happy to help existing Saint FG clients with questions about PAYG and Bounce Back Loans. If you are not a current client then get in touch!
Frequently asked questions
This article has been provided for information purposes only. You should consult your own professional advisors for advice directly relating to your business or before taking action in relation to any of the provided content.
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