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Chancellor converts loan scheme to Pay as You Grow

Amongst the coronavirus support updates made by the Chancellor of the Exchequer this afternoon was the extension of all loans – with particular focus on the Bounce Back Loan Scheme under the new Pay as You Grow scheme.

24th Sep 2020
Staff Writer AccountingWEB
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The Chancellor Rishi Sunak unveils his Winter Economy Plan to parliament.

Many anticipated the extension of the Coronavirus Business Interruption Loan Scheme (CBILS) as part of Chancellor Rishi Sunak’s coronavirus support scheme announcements today. 

Instead, all of the loan schemes have been extended, with applications to lenders open until 30 November and approvals closing on 31 December. Schemes included are CBILS, the Coronavirus Large Business Interruption Loan Scheme (CLBILS), the Bounce Back Loan Scheme (BBLS) and the Future Fund.

The Chancellor also announced that both CBILS and BBLS loans would be made more flexible, with particular focus on the latter.

“The volume and velocity of lending to SMEs through the Coronavirus schemes probably meant this was inevitable,” commented Countingup CCO Andrew Garvey. “Many businesses would have been focused on getting cash to survive and not been looking at how and when they needed to repay the loans.”

“There is still a massive chunk of the self-employed freelancers missing from being eligible for support,” said Coconut accounting lead James Trowell. “Not everyone wants to take loans when they cannot guarantee their next income to even think about paying loans back.”


The Bounce Back Loan Scheme’s (BBLS) repayment structure will be converted into “Pay as You Grow” – offering a more flexible repayment system over a longer period for businesses who borrowed under BBLS, announced the Chancellor. 

Pay as You Grow will allow businesses to extend the length of their BBLS loans from six to ten years, cutting monthly repayments in half. 

Businesses will also be able to pay interest-only repayments for up to six months and struggling businesses will have the option to apply for BBLS payment holidays, suspending repayments altogether for up to six months.

“Extending the repayment period and allowing interest only re-payment will obviously help SMEs with cashflow,” said Garvey. “It does mean that some businesses may be indebted for a lot longer. It could create zombie companies though and reduce the amount of funding available from lenders to more viable businesses post-Covid.”

“Pay-as-you-grow, interest-only terms, additional payment holidays, it’s ultimately putting lipstick on a pig,” commented microbusinsess director Jon Kay. “Debt is debt and for many small businesses struggling to bounce back in a brutal environment it will be the final nail in the coffin.”


As part of the announcement, the Chancellor announced that it would give CBILS lenders the ability to extend the length of loans from a maximum of six years to ten years “if it will help businesses to repay the loan”.

“I’m delighted that these schemes have been extended to 31 December, especially CBILS,” commented founder of The Corporate Finance Network, Kirsty McGregor. “Businesses are only just assessing what their cashflow needs will be and many will need to consider further finance to ensure they are capitalised enough to see them through the next year, provide sufficient funding for them, not only to survive, but to grow as well. 

“The government guarantee provides lenders with the ability to offer facilities as close to unsecured finance as they can and that has to be a great comfort to most business owners. Accountants have the chance to support more businesses now before this scheme ends,” she added.

Almost 2.1m small to medium-sized UK businesses have taken a BBLS, with £29,000 being the average loan size. Many businesses taking smaller BBLS have converted their loans into larger CBILS loans to increase the size of their capital buffer against the economic crisis.

“I would encourage all accountants to take this extra opportunity to speak to all their clients again and to ensure that they are adequately capitalised for the months ahead,” advised Capitalise co-founder Paul Surtees. “Times are still very uncertain and many businesses will currently be considering whether their trade is likely to be affected if further lockdowns are instigated.”

“The government must now focus on building a stronger long term view,” said HW Fisher partner Simon Michaels. “Furlough cannot last forever, and neither will CBILS. In reality, we have 2.5 months left of business this year and more questions than answers remain. The Chancellor might not be able to save all businesses – but he can save more.”

“The travel and hospitality sectors will continue to struggle in the uncertainty of our current climate,” said Satago CEO Sinead McHale. “Generally, when taking on a loan, a business owner will feel optimistic about their future performance and therefore confident that they can repay their debt when the time comes. But with no guarantee that pubs and restaurants will remain open, let alone airlines and hotels, many will lack the confidence to apply for these loans.”

Replies (5)

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By stepurhan
24th Sep 2020 16:06

It wasn't covert, he was on television! :-)

(You might want to add an n to the article title)

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By ireallyshouldknowthisbut
24th Sep 2020 17:19

Having wasted £9 billion on the £1k an employee still there in Jan this is strangely unhelpful.

All we seem to be doing it playing "kick the can" on the government's liability for the easy to fraud bounce back loans, and effectively funding a few firms to fiddle their part time hours.

They really aint very good at giving it out.

They would have done better with targeting on hospitality sector with some big bucks - and closing it for a month so schools can stay open this time around. Ie the complete opposite of the "eat out and help spread covid about" policy in the summer.

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Replying to ireallyshouldknowthisbut:
Andrew Garvey
By AndrewGarvey
25th Sep 2020 10:26

I fully agree with the idea that targeting hospitality with more cash would have been a much better idea.

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By Ian McTernan CTA
25th Sep 2020 12:33

Excellent news and very welcome. Have spoken to a few clients about the changes and it has come as quite a relief to them. Effectively halving the monthly cost will be a huge relief to many.

With the extremely low interest rate on offer they are a no brainer for most- better to have the capital buffer just in case rather than miss out and find early next year cash flow kills you off..

As for targeting hospitality, there is only so much you can throw at a sector that will emerge very different after this pandemic. And supporting one area in particular leaves you wide open to every special interest group pleading it is special or unique and deserving of more money - there isn't an infinite pot and sooner or later non-viable businesses will fail.

Employees should be looking (and have had 6 months already to get started) on training, maybe setting up their own business, reskilling, studying, etc. I wonder how many just treated it as a long holiday and did nothing to improve themselves but did manage to go on holiday and moan about that too.

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By markabacus
25th Sep 2020 18:39

CBILS - Well mybe for some businesses but I have a client:
£2.2m in assets
£200k NWB loan secured
£400k P&L reserve
Remaining finance from owner/directors

So far via 2 brokers have been unable to find a bank that will offer anything under CBILS for £197k

Why, well the £2.2m isn't a warehouse of widgets, 5 completed bungalows that ordinarily would have sold but first Brexit and then Covid are not. 1 finally exchanged yesterday and 3 are under offer but that isn't guaranteed funds. Plus the new site circa £400k including works to date

Ordinarily they would use their bankers developer finance facility but they are no longer lending to property developers. Thank you NWB, the clients bankers for 8 years

They are starting work on a new site but progress hampered by lack of cash which means little work for Subbies, less materials required and therefore less jobs for those producing the materials

And they have 3 interested parties to buy on the new site but have had to walk as there is no firm date to complete them due to lack of funds

Government wants new homes, banks won't lend money!

Poor show all round. Best hope seems to be the current properties under offer complete. When they are all sold should have nearly enough cash to complete the new site without the banks. CBILS was a buffer, a just in case

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