Longer to repay loans
Loads of Somerset businesses signed up for the Government’s Bounce Back Loan Scheme last year. The deal allowed banks to lend money through loans that would be 100% underwritten by Government. The loans last 6 years with nothing to pay in year one and a fixed rate of interest throughout.
Today the Treasury have announced that the loans can be extended and payment terms made more flexible. This has been promised since the Autumn, today we have confirmation. The new scheme options are being branded “Pay as you Grow”. They will offer you the chance to extend your Bounce Back Loan from six years to ten. That will nearly halve monthly repayments, helping cashflow. However two other options have been offered alongside the loan extension.
You will be able to either:
- make interest-only payments for six months (up to three times during the course of the loan)
- or pause repayments for up to six months
The downside is that the Chancellor is relying on the High Street Banks to initiate these changes. To quote from the Treasury announcement “Lenders will proactively and directly inform their customers of Pay as You Grow. And borrowers should only expect correspondence three months before their first repayments are due.“
The High Street Banks do not have a good track record with running Bounce back Loans. The original scheme was a good deal. it was meant to support business through the pandemic. In the end around 1.4 million businesses took them up. Despite this, the main High Street Banks performance was lamentable. We know of many companies that struggled to get their bank to organise a loan – that was – let’s face it, risk free to the bank. Our own experience at The Leveller® was not untypical. It proved impossible to use the automated application system. We were told to ring a number that was never answered. Out of frustration we tweeted our plight to:
- All Somerset MPs
- Chamber of Commerce
- Federation of Small Businesses
- Barclays Head Office
- Barclays Business banking
Suddenly (we are talking within 15 minutes of sending the tweet) we had a text. And with that the name and number of someone who would deal with the problem. We got our loan. But we would not have done without making a massive fuss. Which was not the point of the Bounce Back Loan Scheme.
So yes, the new offer from the Treasury will be welcome by businesses with Bounce Back Loans. But we can only hope that the High Street Banks will up their game in making the offer known to customers.