The UK Chancellor offers more help to 1.4m firms repaying Covid loans

Businesses struggling during the pandemic are to be given more time to make the first repayment on government support loans.

The changes include giving companies an option to extend the length of the loan from six to ten years under a "pay-as-you-grow" initiative.

Chancellor Rishi Sunak said the move was to give companies "breathing space to get back on their feet".

About £45bn has been borrowed by more than 1.4 million small firms under the Bounce Back Loan scheme, which offers cheap loans of up to £50,000.

Under the existing scheme, firms get interest-free loans for the first year. But many will start repaying the money in May, when economic recovery is still expected to be weak.

Under the new arrangements, announced late on Friday (5 February), 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
• Pausing repayments entirely for up to six months

It means that, along with the initial 12-month interest and repayment holiday, loanees – who were able to borrow a maximum of £50,000 – will have 18 months before having to start paying back what they owe.

Mr 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."

Concerns have previously been raised about companies' ability to pay back the cash under the scheme - and about fraud. A recent report by the National Audit Office said up to 60% of loans made under the bounce back scheme may never be repaid.