Pay As You Grow: flexible loan repayment for SMEs

loan bbl

With the third lockdown in full effect across the UK, and shops still closed, many small businesses rely on government support now, more than ever before.

Back in May 2020, business owners took out Bounce Back Loans of up to £50,0000, and repayments were initially due to start in May 2021. The Government had announced that it would cover the costs of interest for the first year of the loan, as well as not requiring any repayments for the first 12 months.

The new ‘Pay As You Grow Scheme’ announced by Rishi Sunak on Friday night, allows Bounce Back Loan borrowers to have more flexibility in repaying their loans. This allows the Treasury to provide small businesses with more time and flexibility in an attempt to save many businesses from closing their doors permanently. 

The new support scheme will be available to over 1.4 million businesses who have taken loans out, adding to nearly £45bn in total.

The Pay As You Grow Scheme at a glance: 

  1. Flexible repayment schedules tailored to your business needs.
  2. Option to extend the loan from six to 10 years, which means that monthly payments are reduced by half with a fixed interest rate of 2.5%. 
  3. Make interest-only payments for six months, with the option to do so up to three times throughout the loan.
  4. Pause repayments for up to six months once (this is now available from the first repayment, rather than the initial decided upon six repayment period).

Those options can be used individually or combined with each other. The fourth option also allows businesses to start paying back their loans 18 months after they took them out. 

All lenders are expected to offer the new options to the borrowers of the Bounce Back Loan Scheme, and are advised to directly inform their customers of the new information available to them. 

Many claim that this new scheme has been introduced as a consequence of a recent report by the National Audit Office stating that up to 60% of business loans would have defaulted because of the slow return to normality, the decline of customers, and as a result lower revenue intake.

This scheme arrived at the right time. Many businesses are fearful of what April will bring as state-backed loans, job support schemes, including the furlough scheme, are deemed to end. We hope that the Chancellor will be extending those schemes throughout the summer to give small businesses the possibility to invest, recover and survive the current climate.


As Fractal steps into the payments space with our own QR payments app, we would love to invite early testers (small businesses) who are keen to pay fewer, lower fees, and receive instant settlement in their bank to sign up to our waiting list to test the app. 

To find out about our SMART initiative helping sole traders and small businesses, our partnership with untied following our BCR Capability and Innovation Pool E win, or if you are interested in partnering with us to create new SME-focused solutions using our APIs, you can contact us our Commercial Lead, Louis, at louis@askfractal.com. 

About Fractal: Fractal is a platform-as-a-service that is reinventing how Small-Medium-Enterprises (SMEs) execute payments and access financial services.

Fractal helps financial institutions (FI) and their SME clients save money by providing a smarter payments engine and an insights platform to deliver the right product, to the right SME, at the right time.