Question to the HM Treasury:

To ask the Chancellor of the Exchequer, what assessment his Department had made of the potential merits of extending the zero interest period for Bounce Back Loans from 12 months to 18 months to allow for all covid-19 lockdown restrictions to have been lifted before the first businesses must begin paying interest.

Under the Bounce Back Loan scheme, no repayments are due from the borrower for the first 12 months of the loan, giving businesses the breathing space they need during this difficult time. In addition, the Government covers the first 12 months of interest payments charged to the business by the lender.

In order to give businesses further support and flexibility in making their repayments, the Chancellor has announced “Pay as You Grow” (PAYG) options. Under Pay as You Grow, following the end of the 12-month payment-free period, businesses can pause their repayments for six months – the interest in this case will accrue to the borrower, for payment later. This means that businesses can opt not to make any repayments on their Bounce Back loan for up to 18 months after they received the loan. Borrowers 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), and to extend the term of their loan from six to ten years, reducing their monthly payments by almost half.

Together, the 12-month payment holiday and interest-free period for borrowers, along with the PAYG options, form part of the Government’s unprecedented support package for businesses to protect jobs - including paying wages through the furlough schemes and self-employed support payments, generous grants, tax deferrals.