The Government is asking banks to offer more flexibility to customers when BBL repayments are due to start.
Called the Pay As You Grow (PAYG) approach, it will offer the following concessions:
1. An extension of the term of the loan from six to ten years;
2. The opportunity for borrowers to make interest only payments for six months for up to three times during the term of the loan;
3. Up to six months payment holiday where no repayments are made.
The third option will now be available to everyone with a BBL from their first repayment, rather than after six repayments have been made. This means that businesses can opt to make no repayments on loans until eighteen months after they originally took them out.
How could these changes affect your cash flow?
The option to increase the term of the loan from six to ten years would almost half your monthly repayments.
The three periods when you can opt to make interest only payments for six months would further reduce the impact on cash flow as would the ability to request a pause in repayments for six months.
How do you access these PAYG features?
In a Press Release announcing these changes on 8 February 2021 the Treasury said:
Lenders will proactively and directly inform their customers of Pay As You Grow, and borrowers should only expect correspondence three months before their first repayments are due.
For more information please click on the PAYG logo above