FIERCE competition from alternative lenders is thought to have driven Barclays’ decision to double its unsecured business lending limit to £100,000.
“There is growing competition in that segment and to be fair Barclays is not the only major bank to make a move here; RBS/Natwest have launched their Esme loans product,” said Conrad Ford, chief executive of small- and medium-sized enterprise (SME) finance aggregator Funding Options.
Esme Loans is a digital lending platform, which provides SMEs with unsecured loans up to £150,000.
“Banks are saying, ‘Why are these propositions attractive to customers? The lending isn’t necessarily cheaper but they are transparent, fast and easy’,” Ford added. “Maybe these characteristics are more important to our customers than we realise and we should react.”
Ford suspects other banks will look to increase unsecured business loan volumes, which could pose a challenge to P2P business lenders, who compete particularly well in that space.
However, P2P business finance provider MarketInvoice is not concerned. Product manager Christopher Guttridge argued that alternative lenders will adapt their limits quickly, depending on their risk appetite.
Ford does not expect increased competition from the banks to ruffle P2P lenders’ feathers.
“The market is already competitive, so I am not sure there can be much of a reaction – for the simple reason that rates are good at this point in the economic cycle,” Ford said.
Looking ahead, MarketInvoice’s Guttridge expects to see more collaboration between alternative lenders and high street banks. “Another way that banks can and are looking to better serve the UK SME market is by partnering with these same lenders,” he said. “For example, Santander’s partnership with Kabbage.”