What is Pay As You Grow (PAYG)?

The Treasury has advised banks operating the Bounce Back Loan scheme to offer an even more flexible approach for when repayments are due to be paid.

Pay As You Grow (PAYG)

The new conditions, known as the Pay As You Grow approach, are offering the following:

1. An extension to the loan length, entending it from six years to ten years.
2. Borrowers are allowed to make interest-only payments for six months of the duration of the loan. They will be able to take advantage of this payment method up to three times while repaying.
3. Borrowers can freeze payments entirely for up to six months.

The Chancellor has now extended the third option’s flexibility, which is available to all who have taken advantage, from the first repayment due, opposed to after six repayments having been made. This means that companies can choose to make no payments on their loans until eighteen months after they initially took them out. (Before these changes, no repayments on Bounce Back Loans were required for twelve months.)

How could these changes affect your cash flow?

The option to increase the loan term from six to ten years would nearly half your payments each month.

The three periods where you can opt to make interest-only payments for six months would further lower the impact on your cash flow and bank balance, as would the ability to ask for a six-month pause in your repayments.

How do we access Pay As You Grow features?

As part of the Press Release released on 8th February 2021, which announced these changes, the Treasury stated:

“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.”

In layman’s terms, it will be down to the banks to let you know of any relaxations. They will undoubtedly advise you on how to implement any of the Pay As You Grow options now available as part of this notification.

If you feel that any of the above could affect you, call An Accounting Gem today. Our friendly and knowledgeable team is well-positioned to offer you any advice. Call on 01473 744 700, email contactus@accountinggem.co.uk, or visit our website www.aag-accountants.co.uk.