The government today rolled out a much needed lifeline for small businesses struggling to stay afloat during the coronavirus pandemic by loosening the terms under which they have to pay back emergency loans.
Under the new scheme, dubbed “pay as you grow” by chancellor Rishi Sunak, all businesses who have borrowed money through the Bounce Back Loans (BBLs) scheme will now have 10 years to repay the loans.
This is extended from the previous six year deadline, and could cut the average monthly repayment by about 40 per cent, the Treasury said.
Sunak also said that the deadline for applying for all four of the government’s business support schemes would be extended until the end of November.
Miles Celic, chief executive of The City UK, said: “The government’s additional package of support is essential to sustaining SMEs and jobs across the country.
“By extending further relief to those SMEs with government-guaranteed loans, the government will help to preserve many viable firms, allowing them the chance to return to growth after the pandemic has passed.
“Matching repayments to the ability of companies to recover demonstrates that government has listened to the advice of industry and business groups who are working closely with companies across the UK economy.”
According to the latest figures, nearly 1.3m businesses have had facilities approved, with a total of £38bn given out as of the beginning of this week.
Companies who are in trouble can also change to interest-only repayments for periods of up to six months. Alternatively, they can temporarily pause their repayments entirely for up to six months, so long as they have made the first six payments.
In addition, the government guarantee on the coronavirus business interruption loan scheme (CBILS) will be extended to 10 years.
He said this would make it “easier for lenders to give people more time to repay”.
In a move aimed at two of the worst-hit sectors, the chancellor extended the 15 percentage point VAT reduction for hospitality and tourism cut by 11 weeks.
The two sectors will now only pay five per cent VAT until 31 March 2020.
Around eight per cent of the UK’s workforce – over 2.4m people – rely on hospitality, accommodation and attractions for employment
The government says extending the reduced rate means that over 150,000 businesses will continue to be supported – although it remains to be seen how much it boosts firms and it is up to businesses to decide whether or not they pass on the savings to consumers.
Kate Nicholls, UK Hospitality chief exec, said: “The extension of the VAT cut was absolutely critical and one that the industry was united in support for, so it is great to see the Government taking note of our major concerns about recovery into 2021.
The announcement of longer tax deferrals and the option of longer loan repayments should deliver some much-needed breathing room for employers.