Chancellor Rishi Sunak said the move was aimed at giving businesses “breathing space to get back on their feet.” Photo: Tolga Akmen / AFP via Getty Images

Small UK businesses that have taken out a government-backed COVID-19 loan will have more time to pay them back.

The Treasury announced Friday night that it would “ease the burden” on millions of businesses by extending the period during which businesses cannot make any refunds.

This gives businesses the option of extending the loan term from six to ten years as part of a “pay-as-you-grow” initiative.

Under the changes, businesses will also have the option of making interest-only payments for six months, businesses can use this option up to three times throughout the loan.

Alternatively, companies can suspend repayments entirely for up to six months.

Currently, businesses get interest-free loans in the first year. But repayments are expected to start in May, when the economic recovery is still expected to be weak.

According to the Treasury, around £ 45 billion ($ 62 billion) has been borrowed by more than 1.4 million small businesses under the Bounce Back loan scheme, which offers cheap loans of up to $ 50. 000 pounds sterling.

Chancellor Rishi Sunak said the move was aimed at giving businesses “breathing space to get back on their feet.”

“Businesses continue to feel the impact of the protracted disruptions from COVID-19, and we are determined to give them the support and confidence they need to navigate the pandemic,” Sunak said.

He added, “This is why we are giving Bounce Back loan borrowers a break to get back on their feet, with more flexibility and time to repay their loans on their terms.”

READ MORE: Half of midsize businesses could go bankrupt if COVID-19 restrictions continue

The Chancellor has been under pressure to act amid growing fears that the continued lockdown will lead to a wave of business closures.

The changes will force the banks that have made the loans to contact customers to explain the new options. But, there have been concerns about the ability of companies to refund money and fraud.

A National Audit Office study found that up to 60% of loans made under the rebound program may never be repaid.

A separate report found that nearly half (49%) of midsize businesses say they will have a hard time staying open if tight lockdown restrictions continue for another two months, a BDO report found, noting that these businesses are “an essential part of any post-pandemic recovery.

It comes as business groups have called on the government to provide a clear exit plan from foreclosure to help businesses reopen.

The Confederation for British Industry (CBI) has urged the government to work with businesses to best identify critical factors for the economy of its roadmap on the latest COVID-19 lockdown in England.

The company group’s calls come as the government prepares to release an exit strategy in late February.

In a letter to Business Secretary Kwasi Kwarteng, the CBI outlined six elements that will help businesses plan and prepare before the restrictions are lifted. He says he will also write a letter to the government of decentralized nations next week.

Along with the roadmap, the CBI also calls for “clear parameters to determine” what economic support measures will be available and for how long.

“The plans should develop in parallel, to ensure that key support measures decline, without cliffs, ensuring that support is gradually targeted to areas that remain closed the longest,” the CBI said.

LOOK: What UK government COVID-19 support is available?

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