EXTRA HELP
Rishi Sunak announces pay as you grow scheme to give businesses more time to pay bounce back loans
STRUGGLING businesses were given more time to pay back Bounce Back loans with a new "Pay As You Grow" scheme.
Chancellor Rishi Sunak announced the extra support as part of a wider Winter Economy Plan that will help to prop up the economy during a second wave of Covid-19.
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He also announced an extension to coronavirus loans for business until the end of 2020.
Plus, a new VAT deferral scheme which gives firms the option to split payments over 11 months.
Today, the Chancellor announced:
- Part-time furlough with up to two-thirds of wages paid
- Cheaper hols and meals out until March due to VAT cut extension
- Extra time for businesses to pay Bounce Back Loans
- Self-employment grants extended and more time to pay tax bills
- VAT bills deferred or split over 11 months
- All coronavirus loans for businesses extended until end of 2020
What is Pay As You Grow?
With Pay As You Grow, small businesses will be able to extend bounce back loan terms from six to 10 years, nearly halving the average monthly repayment.
Firms can also choose to make interest-only repayments, while firms in real trouble can apply to suspend repayments altogether for six months.
Mr Sunak said credit ratings of businesses won't be affected.
What loans have been extended?
The government is extending Bounce Back Loans, Coronavirus Business Interruption Loans, Coronavirus Large Business Interruption Loans and the Future fund until November 30.
What about VAT?
As well as extending the VAT cut for hospitality and tourism businesses, Mr Sunak announced half a million businesses who deferred their bills will be given more space through a New Payment Scheme.
Rather than paying a lump sum in full at the end March next year, you'll be able to make 11 smaller interest-free payments during the 2021-22 financial year.
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What help is out there businesses and for self-employed workers?
THE government has introduced the following measures to help self-employed workers and businesses during the coronavirus outbreak:
Income-tax deferrals: Self-assessment income tax payments, that were due in July, can be deferred to the end of January next year.
Rent support: Businesses who are struggling to pay their rents are protected from eviction until the end of June.
Coronavirus business interruption loan scheme: SMEs can get loans and overdrafts of up to £5million for up to six years and the government will guarantee up to 80 per of these.
Grants of up to £10,000: Small firms can get grants of up to £10,000 to help with ongoing business costs.
VAT payments: VAT payments can be deferred for three months.
Tax bill help: SMEs that cannot afford their tax bills can ask HMRC for a “time to pay” arrangement so any debt collection is suspended.
Business rates holiday: A 12-month business rates holiday has been introduced for many businesses.
Figures show that so far the government has backed £53billion in lending, £35billion of which is through the bounce back scheme alone.
The extension will give banks until the end of the year to process the applications.
It's hoped the state-backed cash will help firms get through another period of tighter restrictions as the winter months close in and coronavirus cases soar.
On Monday, Britain's top scientists issued a Doomsday Covid warning that the nation could face 50,000 new Covid-19 cases a day in just three weeks and deaths will soar if the bug continues to spread at its current rate.
By Tuesday, the PM had brought in stricter measures for England including ordering all retail and restaurant staff to wear masks while at work and slapping a 10pm curfew on pubs.
The government is keen to stave off a second full lockdown over fears it could cause the UK's economic recovery to stall or even crash again.
Even though the restrictions allow businesses to stay open, it is already having a knock on effect on the economy.
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What is a bounce back loan?
BOUNCE back loans are for small companies and sole traders whose businesses have been hit by coronavirus.
Under the scheme, which launched on May 4 and is available until November 4, firms can get loans worth up to 25% of their turnover, up to a maximum of £50,000.
These loans are 100% guaranteed by the government, and it will cover the interest on the loans for the first 12 months.
Businesses are then able to pay back the remaining balance over the next five years at a 2.5% interest rate.
The scheme has been described as a “lifeline” although experts have cautioned firms against rushing into debt.
You can’t apply for a bounce back loan and a coronavirus business interruption loan (CBIL).
The CBIL offers more money - between £50,001 and £5million - but is only 80% backed by the government, meaning it's riskier for banks administering payouts.
Restaurants and bars have had more than half of their trade wiped out in areas where curfews have been enforced by local lockdowns, UK Hospitality said.
Business leaders have been calling on the Treasury to extend the loans but officials had previously resisted, eager to wind down the costly support.
Mr Sunak said: "The resurgence of the virus, and the measures we need to take in response, pose a threat to our fragile economic recovery.
"Our approach to the next phase of support must be different to that which came before.
"The primary goal of our economic policy remains unchanged - to support people’s jobs - but the way we achieve that must evolve."
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