UK to offer businesses more flexibility to pay back COVID loans

·2-min read
Buildings are seen in the Canary Wharf business district, amid the outbreak of the coronavirus disease (COVID-19), in London

LONDON (Reuters) - Companies that took out loans under a COVID-19 scheme will be allowed more flexibility in paying them back by lengthening the period during which businesses can make no repayments, the UK government said on Friday.

The Conservative Party government is under pressure from the main opposition Labour Party and some businesses to offer more protection for firms which have been hit hard by lockdowns imposed to curb the spread of the novel coronavirus and its variants.

The finance ministry said almost 45 million pounds ($62 million) had been borrowed by more than 1.4 million companies under the so-called bounce back loan scheme, which allows banks to lend up to 50,000 pounds with 100% state backing.

The government allows firms flexibility in tailoring their repayment schedules, with the option of extending the length of loans from six to 10 years to reduce monthly payments, making interest-only payments for six months or pausing repayments for up to six months.

Finance minister Rishi Sunak will now extend the flexibility of the third option, which will be available to all from their first repayment, rather than after six repayments have been made, the ministry said in a statement. This means that businesses can choose to make no payments on their loans until 18 months after they originally took them out.

"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 in a statement.

"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."

($1 = 0.7284 pounds)

(Reporting by Elizabeth Piper; editing by Grant McCool)