Question to the HM Treasury:

To ask the Chancellor of the Exchequer, what measures are in place to ensure debt forbearance for companies that received loans under the (a) Bounce Back Loan scheme and (b) Coronavirus Business Interruption Loan scheme and who will likely encounter continued financial difficulties as a result of ongoing covid-19 restrictions.

The Government has already taken action to give businesses the flexibility and space they need to repay their loans. Under the Bounce Back loan scheme no repayments are due from the borrower for the first 12 months of the loan, and the Government covers the first 12 months of interest payments charged to the business by the lender.

In order to give businesses further support in making their repayments, the Government announced “Pay as You Grow” (PAYG) options. PAYG will give businesses the option to repay their Bounce Back loan over ten years. This will reduce their average monthly repayments on the loan by almost half. 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). They can also pause their repayments entirely for up to six months – and given the continued challenges businesses are facing, the Government opted to enable borrowers to make use of this option from the first repayment, which means that businesses can choose to make no payments on their loans until 18 months after they originally took them out. If borrowers want to take advantage of this option, they should notify their lender when they are contacted about their repayments.

Furthermore, the Government have amended the CBILS rules to allow lenders to extend loan terms from six to a maximum of ten years where the borrower is in difficulty and where the lender judges that an extension would help their situation. I should be clear that CBILS term extensions will be offered at the discretion of lenders, unlike the “Pay As You Grow” options for Bounce Back loans. Any business concerned about their ability to repay their finance should discuss this with their lender in the first instance.