Bounce Back Loan Scheme – Pay As You Grow (PAYG)

Posted on 19th April 2021 by David Rudd

Piggy bank wearing a mask

You may have received, or are about to receive, a letter from your bank if you took out a government-backed Bounce-Back Loan (BBL) last year. You may remember that in the first year of the BBL no repayments were required, and the government picked up the tab for any setup costs and interest charges.

Banks are therefore writing to remind account holders that BBL repayments are about to commence if the first year has expired. They are also including details of certain relaxations that are available following the Chancellor’s Pay as you Grow announcements last month.

 

Repayment options. Pay as you Grow (PAYG)

If you need to reduce your monthly repayments, you can advise your bank that you want to take advantage of one the following PAYG concessions:

  1. Reduce monthly payment for six months by paying interest only. This option is available up to three times during the course of your BBL.
  2. You could take a payment holiday for six months. This option is available once during the term of your BBL.
  3. You could request an extension of your BBL loan term from six to ten years. This would reduce your monthly repayments.

You can use certain combinations of these options together, but as the banks will point out, all of these options will increase the overall interest costs of your loan.

 

How might this affect your credit score?

If you ultimately fail to meet your obligations to repay your BBL the government has fully guaranteed your loan. However, your bank will point out that failure to repay may affect your credit score.

Rather cryptically, correspondence from High Street banks we have seen regarding the take-up of PAYG options, also includes the following remark:

Using these options [PAYG] won’t affect your credit score, though it may influence how we assess your creditworthiness in the future…

You would be forgiven if you were confused by the two contradictory remarks in this sentence.

 

Should you take advantage of the PAYG options?

If you have concerns that you need all the help you can get in the coming months and yes, you would like to make the most of the PAYG options, please call so we can discuss your options including any likely consequences for your credit worthiness.

Source material: https://www.british-business-bank.co.uk/ourpartners/coronavirus-business-interruption-loan-schemes/bounce-back-loans/pay-as-you-grow/

 

Finally…

We appreciate these are unprecedented and challenging times to be in business and we all face a period of uncertainty.  No one can predict the future but we believe we can all pull together as businesses and support each other.

The Steven Burton & Co team are here to help you.  If you need a sounding board, some advice or a steer in the right direction, then please don’t hesitate to get in touch.

This material has been prepared for informational guidance purposes only.  Whilst every effort has been made to ensure the contents are accurate, information contained may not be comprehensive. Furthermore it is not intended to provide, and should not be relied on for, tax or accounting advice.

Steven Burton & Co Limited can not accept any liability for any errors or omission or for any person acting on or refraining from acting on the information provided.

David Rudd

David is an Accountant with over 15 years’ experience in helping a large number of different business owners in numerous sectors from consulting agencies to every area of construction you can think of.

At home dealing with numerous different types of accounting software from Xero to QBO and everything in between.  David is always on the lookout for new technology to help business owners to create more time for themselves and their teams.

With a healthy ambition of never resting on the results of yesterday, David is at his best when working with ambitious business owners who want to improve their businesses for eventual sale.

In his spare time, David is often found cheering on his two boys at football, building Lego (which he pretends is for his boys) or watching the latest TV series on Netflix.

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