Pay As You Grow (PAYG)
Learn more about the flexible Bounce Back Loan repayment options below.
- Compare a wide range of lenders and rates
- Check your eligibility in minutes
- Find out how much you could borrow
It's fast, free and won't affect your credit score
If your business took out a Bounce Back Loan Scheme (BBLS) facility during the pandemic, you might still be repaying it. Which means that while the loan initially gave you a lifeline during a very difficult period, its fixed monthly repayments can drain your working capital, making it difficult to invest in new opportunities and grow your small business.
Here’s everything you need to know about PAYG options and how they affect your total cost of borrowing.
What is the Pay As You Grow (PAYG) scheme?
The scheme was introduced back in September 2020, and it's a system the government designed to help businesses repay their Bounce Back Loans with flexibility. The scheme ultimately recognises that economic recovery from the pandemic isn’t a straight line, and your business will have some months that are more profitable than others.
The three main PAYG options
You can adjust your BBL (Bounce Back Loan) repayments in the following three ways. It’s important to note that you can combine some of these options.
1. Extend the loan term from six to 10 years
Under the original Bounce Back Loan Scheme, the loan term was six years. Under PAYG, you can request to extend this term up to 10 years.
| How it works: | It spreads your principal repayment over a longer period, so, in turn, your monthly repayments significantly decrease. |
|---|---|
| The benefit: | The loan is now active for longer, which unfortunately means you’ll now pay more in total interest in the loan’s lifetime. |
| Things to consider: | But the interest rate will remain the same at 2.5%. |
2. Interest-only repayments for six months
Stop paying back the original amount you borrowed and only pay the interest for a six-month period.
| How it works: | You pay less each month for six months, as you’re only servicing the interest. |
|---|---|
| The benefit: | This option gives you temporary financial relief instead of extending the full term of the loan. |
| Things to consider: | You can use this option up to three times during the loan’s lifetime. Which is handy if you find yourself in a sticky financial situation more than once. |
3. A full repayment holiday for six months
If you’re looking for an option that gives you temporary financial relief without impacting your loan term, you can pause all repayments for six months.
| How it works: | You don’t pay a penny for six months. |
|---|---|
| The benefit: | If you’re facing a short-term cash flow crisis (like paying an unexpected bill), this option is ideal. |
| Things to consider: | You can only use this option once. And interest will continue to accrue over the period, so you will end up paying slightly more overall. |
Why consider the Pay As You Grow model?
The main reason you might consider using PAYG is to protect your working capital. If you don’t have healthy cash flow, your business will struggle to survive. These PAYG options exist to help your business continue to operate and grow, without BBLS repayments looming over your bank account.
You might want to consider PAYG if:
- Your business or industry is experiencing a dip in demand
- You’re dealing with rising costs
- You want to take advantage of high-return on investment opportunities
- You need to simplify your monthly outgoings
The total cost of borrowing
Although you’re able to take a break from repayments or extend the loan term, the longer the debt remains unpaid, the more interest you’ll accrue. So it’s important to understand that PAYG isn’t a free scheme.
If you extend your loan term from six to 10 years, you’ll be paying interest for another four years. So, although you’ll save money in the present, calculate whether the additional interest is affordable for your business in the future.
Am I eligible for PAYG?
If you have an active Bounce Back Loan and have made at least six months of repayments, then you’re eligible for PAYG.
You can request to take advantage of PAYG at any point after the first six months of repayments throughout the lifetime of your loan.
How to apply for Pay As You Grow
You can’t apply for PAYG through Capalona or the British Business Bank. You must apply directly through the lender you borrowed the Bounce Back Loan from.
Many lenders have dedicated portals for PAYG. Log in to your online business banking, find your Bounce Back Loan account details and select which PAYG option you want to use.
If you can’t find this information, contact your lender directly.
How can Capalona help?
Although you can’t apply for PAYG through our platform, we can help you find a suitable alternative business finance to help you grow your small business.
Perhaps you need to access a line of credit to dip into additional funds as and when you need them, or you’d like to refinance your current debt with a consolidation loan?
We can help you find and compare flexible and affordable financing options to help your SME continue to thrive.
Compare alternatives to PAYG Loans.
FAQs
No, it won’t negatively impact your credit score. But lenders might consider it if you apply for new credit, as it shows how you managed existing debt and could indicate financial strain or proactive cash flow management. Each lender is different.
Using PAYG isn’t classed as a default or missed payment. If you do have poor credit and are looking for additional financing, check out our bad credit loans.
Yes, you can extend your loan term to 10 years and take advantage of the six-month interest-only payments to help manage costs both in the short and long term. Some lenders ask you to wait a few days between each request.
Yes, if you realise you have the spare capital to repay your loan before the 10-year term, you can do that without incurring any penalties.
If the PAYG options aren’t enough to help you manage your debt, you should contact your lender. They can support you through any financial difficulties.
About the author
Adrian T
5/5
Amazingly fast, efficient service, minimal paperwork. So much faster than my business bank of twelve years.
FAQs
0330 223 5036