Landlords and property developers who took out a Bounce Back Loan to get through the pandemic have been given more breathing space to pay back the cash.
Under Chancellor Rishi Sunak’s Pay as You Grow scheme, businesses can now delay all repayments for a further six months – an option available to everyone from their first repayment, rather than after six repayments have been made.
Borrowers can also 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. This is in addition to the government covering the costs of interest for the first year of the loan.
More than 1.4 million businesses have taken out a total of nearly £45 billion through the scheme. Many landlords and developers were encouraged by some of the more unscrupulous property gurus to apply as a cheap way to raise finance to buy property. While Bounce Back Loans can be used for development projects if you lend it to another company, they can’t be used as a deposit for buying investment properties.
However, criteria is vague, with HM Treasury advising that they are to help businesses ‘keep operating’ or ‘stay afloat’ during the crisis.
Sunak says he’s determined to give businesses 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,” he adds.
“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.”
As of 24th January, the government had received 1.9 million applications and approved more than 1.4 million Bounce Back Loans.