We have also developed a supporting infographic.
Originally announced by the Chancellor of the Exchequer in September 2020, Pay As You Grow (PAYG) will enable businesses who have started repaying their Bounce Back Loans to:
- request an extension of their loan term to 10 years from six years, at the same fixed interest rate of 2.5%
- reduce their monthly repayments for six months by paying interest only. This option is available up to three times during the term of their Bounce Back Loan
- take a repayment holiday for up to six months. This option is available once during the term of their Bounce Back Loan.
Borrowers can use these options individually or in combination with each other.
Borrowers should be aware that they will pay more interest overall if they use one or more of these options, and that the length of the loan will increase in line with any repayment holidays taken.
How do I access Pay As You Grow?
Businesses first began to receive BBLS loans in May 2020 and the first repayments will become due from May 2021 onwards. Lenders will start to communicate Pay As You Grow (PAYG) options to Bounce Back Loan Scheme borrowers three months before repayments commence.
Lenders will inform their customers about PAYG directly, so borrowers should wait until they are contacted by their lender before enquiring about the scheme.
Lenders will advise customers about how their repayment options may change according to their choices under the scheme. Borrowers remain responsible for repaying their Bounce Back Loan and fully liable for the debt.
Will using Pay As You Grow affect my ability to obtain finance in the future?
Using Pay As You Grow will not, in principle, affect a business’s ability to obtain finance in the future. Pay As You Grow is designed to alleviate borrowers’ financial difficulty, even before it arises, by giving borrowers flexibility in meeting their repayment obligations. Using Pay as You Grow will not affect a borrower’s credit rating, but it may affect lenders’ future creditworthiness assessments. For example, when considering a request for additional funding a lender will take into consideration incomings and outgoings, including existing debt repayments such as the Bounce Back Loan Scheme facility. It will also consider a business’s total debt exposure, which will again include the outstanding Bounce Back Loan Scheme facility.
Other business finance support options
In the first instance, businesses who have concerns regarding repaying debt should contact their lender.
In addition, the British Business Bank has a range of guidance and resources available to all businesses, including content on managing your cashflow and a list of independent advice services.
Read our Bounce Back Loan case studies.