Bounce Back Loans Scheme: Expert discusses how they work
Rishi Sunak launched bounce back loans in May 2020 in a bid to help small businesses across the UK. However, Martin Lewis later got written confirmation from the treasury that the loans could be used to “support usual income”, with the Money Saving Expert highlighting this could be used by individuals who had “fallen through the cracks” of SEISS.
The bounce back loan scheme allows businesses to borrow between £2,000 and £50,000 to help them through the pandemic.
These loans are backed by the Government and while no repayments are due within the first 12 months, they will need to be repaid eventually.
However, HM Treasury confirmed today that businesses who took out a loan will now have greater flexibility to repay their debts.
The Chancellor’s “Pay as You Grow” repayment flexibilities now include the option to delay all bounce back loan repayments for a further six months, meaning businesses can choose to make no payments on their loans until 18 months after they originally took them out.
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Additionally, the option to pause repayments will now be available to all from their first repayment, rather than after six repayments have been made.
Pay as you Grow will also enable borrowers to extend the length of their loans from six to ten years (reducing monthly repayments by almost half) and make interest-only payments for six months, in order to tailor their repayment schedule to suit their individual circumstances.
HM Treasury detailed these options will be available for more than 1.4 million businesses who took out nearly £45billion in aggregate from the bounce back scheme.
From today, lenders will begin reaching out to borrowers to provide information on repayment schedules and how to access flexible repayment options.
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As these new updates were introduced, Rishi Sunak had the following to say: “”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.
“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.”
Kwasi Kwarteng, the Business secretary, also welcomed the changes: “The comprehensive and generous financial support package we have delivered across the UK has protected jobs, saved businesses and kept local economies on the move.
“While our vaccine rollout is moving at an incredible pace and the end is in sight, we know times are still tough for many companies and extra support is needed.
“These flexible repayment options will give businesses the time they need to recover from the pandemic before paying back loans, giving them the breathing space and confidence to build back better.”
Businesses are able to apply for a bounce back loan if their company:
- Is based in the UK
- Was established before March 1 2020
- Has been adversely impacted by coronavirus
There are currently 29 lenders participating in the scheme, which includes several retail banks.
Claimants will need to approach the lenders themselves as each one may have a different application process.
The lenders will ask claimants to fill in an online application form and self-declare that they are eligible.
A full list of participating lenders can be found on the British Business Bank’s website.
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