Bounce Back Loan Scheme

(asked on 18th January 2021) - View Source

Question to the Department for Business, Energy and Industrial Strategy:

To ask the Secretary of State for Business, Energy and Industrial Strategy, what assessment his Department has made of the potential default rate for SMEs that took out loans under the Bounce Back Loan Scheme; and what steps he is taking to reduce that rate.


Answered by
Paul Scully Portrait
Paul Scully
This question was answered on 21st January 2021

The preliminary estimate of default rates was published in the BEIS Annual Report and Accounts for 19/20, is based on losses observed in previous programmes which are similar to the Scheme. However these estimates are highly uncertain.

In order to reduce the potential default rate for SMEs, on 24th September my Rt. Hon. Friend Mr Chancellor of the Exchequer announced the Pay As You Grow measures. Under the measures, the Government will give all businesses that borrowed under the Bounce Back Loan Scheme (BBLS) the option to repay their loan over a period of up to ten years. This will reduce their average monthly repayments on the loan by almost half. UK businesses will also have the option to move temporarily to interest-only payments for periods of up to six months (an option which they can use up to three times), or to pause their repayments entirely for up to six months (an option they can use once and only after having made six payments).

These changes will provide greater flexibility to repay these loans over a longer period and in a way that better suits businesses’ individual circumstances. A business which took out a £30,000 Bounce Back Loan would see their average monthly repayments fall from £532 to £309 (42% reduction) if they repaid the loan over 10 years rather than six. The same borrower could temporarily reduce their monthly repayments to just £63 if they switched to interest-only repayments.

The first Bounce Back Loans repayments will begin in May 2021, and businesses will have the opportunity to request these Pay as you Grow measures before their first repayments fall due.

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