Important note: WE ONLY PROVIDE ADVICE ON THE BOUNCE BACK LOAN / PAY AS YOU GROW PROCESS TO CURRENT CLIENTS FOR WHOM WE HAVE ALREADY PREPARED ACCOUNTS. WE PRIDE OURSELVES ON HELPING CLIENTS TO SURVIVE – AND THRIVE. SO IF YOU NEED AN ACCOUNTANT WHO CAN ADVISE YOU WHEN TIMES GET TOUGH, GET IN TOUCH WITH THP TODAY.
Back in May 2020, the government launched the Bounce Back Loan Scheme. It gives businesses that are negatively affected by COVID-19 the opportunity to borrow between £2,000 and £50,000 depending on turnover. Interest is 2.5% per annum. The loans are offered by accredited lenders and are 100% guaranteed by the government. Originally, you didn’t need to make payments for the first 12 months and the length of the loan was six years. However, the government has just launched a new ‘Pay as you Grow’ (PAYG) scheme, which gives borrowers more flexibility to repay their loans. If you are nearing the end of your 12 month period after taking out a bounce back loan and are worried that you won’t be able to afford the repayments from month 13, then you do have some options.
How does ‘Pay as you Grow’ work?
After the Bounce Back Loan Scheme opened its doors to borrowers, more than 1.4 million businesses took out nearly £45 billion in loans. Many of these firms are still struggling because of the coronavirus pandemic.
The Pay as you Grow scheme now gives these borrowers more control over their repayment schedule. It does this in three main ways.
- Originally, businesses had to pay back their loan within 6 years. (Early payment without penalty was – and still is – allowed). Under the new scheme, businesses can extend the length of their Bounce Back Loan to 10 years.
- If a business finds itself struggling with repayments, it can ask to make interest-only payments for six months. It can use this option up to three times during the lifetime of the loan.
- Businesses can also ask to pause repayments entirely for up to six months. If a business did this before the first repayment was due, it would effectively mean payments were deferred for 18 months after taking out the loan.
It’s also worth remembering that not only are there no repayments for the first 12 months of the loan, but also there is no interest payable for this period.
How do I access Pay as you Grow?
The government has told all accredited lenders that they should offer the Pay as you Grow scheme. After discussions, lenders have agreed to send all borrowers identical information on PAYG. You should expect to receive this information three months before your first repayment is due. If you haven’t received anything you should contact your lender.
Should I use Pay as you Grow?
The answer to this question really depends on your circumstances. If you do extend your loan from six years to ten, then you will significantly reduce your monthly payments. On the other hand, if you take any of the six-month repayment breaks, then this will increase subsequent monthly payments. It’s best to use these opions only if you have to.
Where can I get more help and information?
You can find official information on the Bounce Back Loan scheme on the gov.uk website. If you have not yet taken out a loan, you are too late to do so, as applications closed in March 2021 but if you already have a bounce back loan then this blog is for you.
Remember, if you have not heard from your lender about pay as you grow three months before your loan repayments are due to start, then get directly in touch with your lender.
We are happy to help existing THP clients with questions about PAYG and Bounce Back Loans. If you are not a current client, you may wish to speak to your Independent Financial Adviser as a first step.
About Jon Pryse-Jones
Since joining THP in 1978, Jon Pryse-Jones has been hands on with every area of the business. Now specialising in strategy, business planning, and marketing, Jon remains at the forefront of the growth and development at THP.
An ideas man, Jon enjoys getting the most out of all situations, “I act as a catalyst for creative people and encourage them to think outside the box,” he says, “and I’m not afraid of being confrontational. It often leads to a better result for THP and its clients.”
Jon’s appreciation for THP extends to his fellow team members and the board. “They really know how to run a successful business,” he says. He’s keen on IT and systems development as critical to success, and he continues to guide THP to be at the cutting edge and effective.