UK relaxes repayment terms for Covid Bounce Back Loans
UK businesses that took out risk-free Covid loans will be given more generous repayment terms, after a recent warning that up to half of the £45bn in borrowing will not be paid back.
The Treasury announced today that the 1.4m businesses who have taken out a Bounce Back Loan will be able to pay it back over ten years instead of six, make interest-only payments for six months or pause repayments for up to six months.
The commercial loans, which gives businesses access to loans up to £50,000 by British banks, were launched in May last year and see the government take on 100 per cent of the risk if the borrower defaults.
The new repayment terms are being called “pay as you grow” by the Treasury.
“Businesses are continuing to feel the impact of extended disruption from Covid-19, and we’re determined to give them the backing and confidence they need to get through the pandemic,” Rishi Sunak said.
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“That’s why we’re giving Bounce Back Loan borrowers breathing space to get back on their feet, through greater flexibility and time to repay their loans on their terms.”
It comes amid warnings that the taxpayer faces huge losses from the emergency Bounce Back Loans.
Sam Woods, Bank of England deputy governor and head of the Prudential Regulation Authority, today warned that as much of half of the £45bn paid out could be lost.
Woods said UK taxpayers faced a “significant” loss from Bounce Back Loans and warned the toughest period was yet to come.
“Firms which have been sustained by the government support and by all the loan programs and all of that, some of them will actually start to go bust,” he told a London School of Economics webinar.