Chamber reiterates call for support as Pay As You Grow details announced

Greater Birmingham Chambers of Commerce today reiterated its call for the Chancellor to go further in backing the hardest-hit firms - as further details of the Pay As You Grow scheme were announced.

The scheme was first announced by Chancellor Rishi Sunak on 24 September.

It was today confirmed that the scheme will cover the following measures open to Bounce Back Loan Scheme borrowers:

• an extension of their loan term to10 years from six years, at the same fixed interest rate of 2.5 per cent
• reducing monthly repayments for six months by paying interest only. This option is available up to three times during the term of their Bounce Back Loan.
• taking a repayment holiday for up to six months. This option is available only once during the term of the BBLS. The borrower can now access this easement right away, rather than the original requirement of having to make six regular payments.

Lenders are expected to start communicating the Pay As You Grow options to BBLS borrowers three months before repayments commence, starting from next week with the first payments due in May 2021.

The Bounce Back Loan Scheme facilitates loans to SMEs of between £2,000 and £50,000 backed by a 100 per cent Government guarantee, with no fees, interest or repayments to pay for the first 12 months.

The first loans were issued in May 2020 and to date over £44.7bn in Bounce Back Loan Scheme facilities have been approved.

The Chamber welcomed the announcement in principle, but urged the Chancellor to go further and take action to:

• Extend the interest free period for the CBILS to reflect the fact that the UK remains in crisis many months on from applications opening.
• Ensure all borrowers with CBILS and BBLS facilities have the option of extending repayment terms to 10 years.
• Explore innovative options for freeing up finance for growth while ensuring prudent use of government guarantees such as: converting CBILS debt into a form of a Government backed equity fund, allowing partial or complete write off of CBILS debt against investment in growth and new employment, enabling the release or subordinating of security of CBILS loans by banks in favour of new commercial loans for funding business and employment growth and introducing a surcharge on taxable profits and shareholder salaries which would allow businesses to pay down their debt over a longer period

In the run-up to the Chancellor 's budget, the Chamber is highlighting these messages and others urgent areas for Government action from its Back Our Businesses report.

Henrietta Brealey (pictured), chief strategy officer at Greater Birmingham Chambers of Commerce, said: “These loans have been a lifeline for many, but when they were launched, no one knew that this crisis would go on for as long as it has.

“Many of the most impacted businesses who took out these loans early on are now seeing the end of the interest free period looming - while still in lockdown.

“Others, now heavily burdened with debt that 's been spent just managing overheads, are looking at the opportunities ahead when the vaccine takes effect and pent up demand is released - and finding themselves unable to access further finance to enable this potential growth.

“More details on the Pay As You Grow Scheme is very welcome at this critical moment - particularly regarding options for impacted businesses to activate their repayment holiday immediately, if required, and extend their loan term.

“Of course, the devil will be in the detail and it is critical that these proposals have been brought forward with the buy in on lenders to ensure all businesses that need it can access this support.

“We also urge the Chancellor to go further. Many higher turnover SME businesses with significant overheads to manage have had to access loans under the Coronavirus Interruption Loan Scheme rather than BBLS.

“It is critical that they, too are able to access further interest free or repayment holiday periods to reflect the current environment.

“The Government must also look beyond the current loan schemes into the future post-lockdown and how businesses can manage pandemic debts while accessing finance to grow.

“Covid-19 has hit employment and the economy - which in practice means individuals and communities - hard. We need to ensure that those businesses with the resilience to make it this far survive these remaining months of tight restrictions and are in the best place to rebound quickly.

“That 's why we 're teaming up with our members to call on the Chancellor to Back Our Businesses in his forthcoming budget. ”

Chamber members can join this call to action using the social media hashtag #BackOurBusinesses