Small firms will get more time to repay state-backed loans taken out to help them through the coronavirus crisis.
Changes include giving companies the option to extend the length of the loan from six to 10 years under the ‘pay-as-you-grow’ initiative.
Chancellor Rishi Sunak said the move was to give firms “breathing space to get back on their feet”, reports the BBC.
There are fears that the continuing lockdown will lead to a wave of company closures.
About £45 billion has been borrowed by more than 1.4 million small firms under the Bounce Back Loan scheme, which offers loans of up to £50,000.
Under the existing scheme, firms get interest-free loans for the first year and many will have to start repaying the money in May.
New arrangements announced on Friday (February 5) mean businesses will have the options of extending the length of the loan from six years to 10; making interest-only payments for six months, with the option to use this up to three times throughout the loan; and pausing repayments entirely for up to six months.
Sunak said: “Businesses are continuing to feel the impact of extended disruption from Covid-19, and we’re determined to give them the backing and confidence they need to get through the pandemic.
“That’s why we’re giving Bounce Back Loan borrowers breathing space to get back on their feet, through greater flexibility and time to repay their loans on their terms.”
Banks which have been processing the loans will be asked to contact customers from Monday (February 8) to explain the new options.
The Guardian reported that Labour said the latest changes by Sunak were “minor tweaks to a policy already more than 20 weeks old”.
The shadow chief secretary to the Treasury, Bridget Phillipson, said: “He’s clearly out of ideas when it comes to supporting hard-pressed businesses.”
But UKHospitality, the hospitality trade association, welcomed the news of greater flexibility on repayment of bounce back loans. Chief executive Kate Nicholls said: “This is a welcome announcement from the Chancellor as the greater flexibility offered in repayment options will give valuable breathing space for many hospitality businesses.”