The British Business Bank (BBB) has been urged to support more peer-to-peer lenders to help fill the small- and medium-enterprise (SME) funding gap.
The state-backed development bank channels funds to SMEs through a variety of lenders. These have included some of the largest P2P platforms such as Funding Circle and RateSetter, as well as former P2P lenders ThinCats and MarketInvoice (which has since rebranded to MarketFinance).
But some executives from smaller P2P platforms have argued that the BBB should extend its funding to a wider array of lenders.
“The BBB supports SMEs by working with few select institutions, thereby restricting the choice of credit provider to the SMEs,” said Daniel Rajkumar, founder and managing director of P2P business lender Rebuildingsociety.
“In the past we have been repeatedly told that our lending volumes are too low.
“The reason they are low is that our cost of credit is higher (we don’t receive free money) and we are in a competitive marketplace where brokers will often refer loan applications to cheaper providers.
“We ask that the BBB facilities be extended to all FCA authorised and regulated P2B platforms, irrespective of size, location and lending volumes.
“This will open the market, give SMEs choice and reduce the imbalance and dysfunction caused.”
David Bradley-Ward, chief executive of asset-backed business lender Ablrate, said that the BBB should help fund more platforms but noted that lack of awareness may be an issue.
“The BBB should help fund more P2P platforms, but more should apply,” he said.
“I do think they should be lending through more platforms but that may be because platforms aren’t applying.
“I don’t know how many have applied.
“Any help they can give to SMEs at this time is fantastic, we haven’t used them yet.”
Bradley-Ward said that he contacted the BBB in the early stages of Ablrate and was told that the lender needed to have been doing business for at least a year and have £10m of lending under its belt.
He said the Ablrate is now getting the paperwork in order to submit an application soon.
“The BBB’s response was reasonable,” he said.
“We had been around for seven or eight months and were told to come back once we meet the criteria.
“If you’ve just started a platform and the BBB were investing £200,000 into each loan that would be a little reckless.
“I think the process should perhaps be a little more transparent and you should able to do it online. We’re going through the process.”
The BBB said that it helps grow and develop alternative finance markets for SMEs but applications are assessed and have to meet the criteria.
“A key part of the BBB’s remit is to support the development and growth of alternative finance markets for small businesses, while delivering a good return to the taxpayer,” said a spokesperson for the BBB.
“Funding decisions made by the bank are decided on their own merits in terms of diversifying or increasing the finance options available to smaller businesses.
“These are evaluated against criteria set out in the Request for Proposals for each programme.”
P2P lenders can apply for funding to the British Business Bank via two different schemes, the Investment Programme or the Enable Programme.
For both schemes, lenders need to submit an application and meet with the BBB, who will assess whether they meet the bank’s investment criteria. In both cases, the BBB will look at elements such as the track record of the firm and the expertise of the management team.