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<p>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.</p><p> </p><p>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).</p><p> </p><p>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.</p><p>
</p><p>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.</p>
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