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Peer2Peer Finance News | July 21, 2019

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Five ways the private and public sector is supporting non-bank lenders

Five ways the private and public sector is supporting non-bank lenders
Marc Shoffman

FROM the Bank of England’s quantitative easing scheme to Help to Buy Equity loans, sometimes it seems as if mainstream lenders are getting more support than those in the alternative finance space.

Banks have benefited from more liquidity being created in the markets through quantitative easing while mortgage lending has been boosted by the Help to Buy scheme, which provides a government loan to support a borrower’s deposit,

Mainstream banks can still be reluctant to approve loans even with all this support, but there are also schemes giving a boost to non-bank lenders such as peer-to-peer lending firms from both the private and public sector.

Bank Referral Scheme

The Bank Referral Scheme was launched in November 2016, mandating nine of the UK’s high-street banks to pass on the details of rejected business borrowers to designated finance aggregator platforms, who can then make referrals to alternative finance firms such as P2P lenders.

The Treasury reported in August 2018 that more than 900 small businesses turned down for loans from the UK’s high-street banks had received over £15m of funding through the Bank Referral Scheme.

The three aggregrators in the scheme are Funding Options, Alternative Business Finance and  Funding Xchange.

CreditStream

Last month, investment bank European Risk Capital launched a £1bn multi-client debt programme for UK-based, mid-market non-bank lenders to raise funds.

The programme – titled ‘CreditStream’ – will effectively offer wholesale funding access to the alternative debt capital markets, and aims to help fill the funding gap that exists in the UK’s alternative lending space.

It has a minimum deal target size of £10m, making it primarily suited to mid-sized lenders including bridging and development lenders, second charge mortgagees, consumer and SME funders, auto/equipment finance companies, and fintech lenders. The maximum deal size can be in excess of £100m.

British Business Bank

This week, the British Business Bank has opened up its ENABLE Guarantee programme to non-bank lenders, including asset-based lending providers.

Under the programme, the UK government takes on a portion of the lender’s risk on a portfolio of loans to smaller businesses, in return for a fee. The state-backed development bank has so far committed guarantees of more than £900m under the programme.

The programme was previously only open to UK banks and UK branches of foreign banks. The extension means that a broader range of smaller finance providers, including asset finance and asset-based lending providers, are now eligible.

Regulatory sandbox

Want to test an idea before launching it to the market? The Financial Conduct Authority offers authorised firms, unauthorised firms that require authorisation and technology businesses the chance to test products in a controlled environment.

Previous users include P2P analysis and investment platform Orca.

Applications for the fifth round closed last month but there are plans for new entries.

Fintech bootcamps

Plenty of non-bank firms including P2P lenders have benefited from the support of other entrepreneurs by joining other accelerator programmes.

These let start-ups access mentoring and training to help build and launch their enterprise.

Programmes include Startupbootcamp and Level 39, which has supported Welendus.