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Law360, London (February 8, 2021, 12:28 PM GMT) -- The British Treasury chief said Monday that the U.K. government will allow businesses an extra six months to repay £45 billion ($61 billion) in state-backed loans they took out during the COVID-19 crisis.
Chancellor of the Exchequer Rishi Sunak said the new "pay as you grow" program will offer 1.4 million businesses the option to tailor the repayments of emergency loans they took out during the COVID-19 outbreak according to their circumstances.
He added that it will allow companies to delay all repayments by six months. This was previously available only to businesses that had already paid off a portion of their loans, but is now an option from the first repayment.
"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," Sunak said. "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."
The Pay As You Grow scheme will also give businesses the option to extend the life of their loans from six to 10 years. This will cut monthly payments by almost half, the government said.
The extension of the option to delay repayments to all businesses means that companies can now opt to make no payments until 18 months after they take out the loan. The government said that banks and lenders will begin contacting businesses Feb. 8 to discuss their options for repayment flexibility.
The extra measures are in addition to the government offering to cover interest for the first 12 months of the loan.
Trade body U.K. Finance said in January that banks and the financial services sector have provided almost £71 billion in funding to businesses under a basket of government-backed lending programs designed to help companies pull through the COVID-19 crisis.
More than half of the financing went to the program for "bounce back" loans, which the government rolled out in May 2020, and has supported small businesses with £45 billion, UK Finance said, quoting HM Treasury data.
Larger businesses were given £5.1 billion in loans under the COVID-19 help program designed for bigger companies that was launched in April, the group, which represents banks and building societies, said on Thursday.
Another program, the Coronavirus Business Interruption Loan Scheme, which took off in March 2020 and is designed for small and midsized enterprises, has helped more than 87,000 companies.
--Additional reporting by Irene Madongo. Edited by Joe Millis.
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