Companies will be given an option to extend the length of their loan from six to ten years under a "pay-as-you-grow" initiative.

During the pandemic around £45bn has been borrowed by more than 1.4 million small firms under the Bounce Back Loan scheme, which offers loans of up to £50,000.

Through the government’s existing policy, firms get interest-free loans for the first year.

Under new arrangements, businesses will also have the options of making interest-only payments for six months, with the option to use this up to three times throughout the loan, or of pausing repayments entirely for up to six months.

Banks will be asked to contact customers from Monday (8 February) to explain the new options to customers.

Sunak said businesses were "continuing to feel the impact of extended disruption from Covid-19”, adding he was “determined to give them the backing and confidence they need to get through the pandemic”.