A third of small businesses still unaware of bounce back loan repayment options.
A year on from the launch of the Bounce Back Loan Scheme (BBLS), almost one in three (29%) small and medium-sized businesses who took out a loan are not aware of the Pay As You Grow (PAYG) options which provide more time and flexibility to make repayments, according to research by
Through the government's PAYG scheme, borrowers can request an extension of their loan term to 10 years from the standard six years, reduce their monthly repayments for six months by paying interest only, or take a full repayment holiday for up to six months. All lenders are writing to their customers at least three times before repayments are due to start to remind them and explain the options available.
With repayments due to start in early June for many borrowers, the research - carried out in partnership with YouGov - found that a third (34%) of businesses are already fully aware of the options available, while another 37% are only somewhat aware.
Around half of businesses (48%) say their bank has been the main source of information about how to repay their loan - either through letters and emails, phone calls or its website - while more than one in 10 (13%) say they haven't yet looked for any information about making the loan repayments.
'We'd encourage businesses to look carefully at the support available and what using Pay As You Grow would mean for future repayments. For most customers, it's quick and easy to select an option via their lender's website, which if needed can provide vital breathing space to get their business back on its feet as lockdown restrictions are gradually eased.'
Repayment intentions
More than a third (35%) of small businesses intend to make the standard monthly repayments as set out in their original loan agreement. Perhaps surprisingly, 16% of borrowers say they plan to pay back their BBL in full, before repayments are due to start.
In terms of the Pay As You Grow scheme, 13% of businesses are planning to extend the loan term to 10 years, making this the most popular PAYG option, while just 5% of businesses plan to make use of a full six-month repayment holiday.
Usage of loan funds
The research also shows that almost half (48%) of businesses still have the majority of their BBL funds unspent, including around a quarter (23%) who are still holding on to the full amount. Just 26% of businesses say they have spent all the money they borrowed.
More than a third of businesses (34%) say they would definitely not have survived the impact of the pandemic without the Bounce Back Loan, while a further 12% are unsure.
Business customers of both
Pay As You Grow | Business |
[Early data shows that extending the term of the loan from six to 10 years is by far the most popular choice for those
Pay As You Grow - how it works
Originally announced by the Chancellor of the Exchequer in
request an extension of their loan term to 10 years from six years, at the same fixed interest rate of 2.5%
reduce their monthly repayments for six months by paying interest only. This option is available up to three times during the term of their Bounce Back Loan
take a full repayment holiday for up to six months. This option is available once during the term of their Bounce Back Loan.
Borrowers can use these options individually or in combination with each other.
Borrowers should be aware that they will pay more interest overall if they use one or more of these options, and that the length of the loan will increase in line with any repayment holidays taken.
About the Bounce Back Loan scheme
The Bounce Back Loan (BBL) Scheme, launched in
The scheme was delivered through a network of accredited lenders. No repayments were due during the first 12 months, and government covered any interest payable in the first 12 months through a Business Interruption Payment to the lender. The government set the interest rate for these loans at 2.5% per annum and the repayment term was fixed at six years.
Lenders benefit from a 100% government-backed guarantee and businesses remain 100% liable to repay the full loan amount, as well as interest, after the first year.
It closed to new applications on the
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