A reduced payment plan is exactly what it sounds like: your regular payment goes down to a level your company can currently manage. It is the right tool when income has dropped but not disappeared. The trade-off is worth understanding before you agree one.
The balance clears more slowly
Because you are paying less each period, less comes off the principal each time, so the balance falls more gradually. Interest runs at 0.25% per day on whatever is still outstanding, so a slower-clearing balance accrues more interest in total than the original schedule would have. The 100% cap is your backstop: even on a long reduced plan, the total cost of credit cannot exceed the amount you borrowed, so you will never repay more than double.
When it is the right choice
A reduced plan suits a real, sustained fall in income — a lost contract, a quieter season that has become the new normal — rather than a one-off gap, where an extension or short freeze is cheaper. We will always show you what the reduced plan costs against the original schedule so you can choose with your eyes open.
We lend only to UK limited companies and LLPs, and the loan is to the company with no director personal guarantee. As business finance outside the consumer-credit regime, it is not covered by the Financial Ombudsman Service or FSCS.
See also: The difference between a payment holiday and a reduced payment plan, Does interest keep building while my company is in arrears?, What is a hardship variation?.