Chancellor Rishi Sunak has unveiled a package of measures worth more than £300bn to support small- and medium-sized enterprises (SMEs) through the coronavirus crisis, but will this push P2P lenders out of the space?
Many P2P lenders have grown off the back of a reluctance by banks to lend to SMEs, but now the government has made mainstream providers crucial in providing support for firms that may struggle with cashflow in the coming weeks and months.
A new coronavirus business interruption loan scheme, delivered by banks through the British Business Bank, will enable businesses to apply for a loan of up to £5m, with the government covering up to 80 per cent of any losses with no fees.
Businesses can access the first six months of that finance interest free.
SMEs in the retail, hospitality and leisure sector can also apply for grants worth up to £25,000 if they have a rateable value over £15,000 and below £51,000.
Daniel Rajkumar, founder and managing director of P2P business lender Rebuildingsociety, suggested the British Business Bank (BBB) doesn’t just have to provide this finance through mainstream providers.
“It’s important the small P2P platforms, like ours, are a conduit in facilitating the relay of this economic support,” he said.
“The historic approach of working with few, large P2P platforms has come under parliamentary criticism and we encourage the BBB to use a diversified approach when working with the P2P lending industry.
“We are well positioned to serve regional businesses, we hope that these packages don’t create dysfunction in the market.
“Its important that there aren’t winners and losers. Many of our lenders will be wondering if our borrowers will refinance existing loans with cheaper credit.
“We will play a vital role in helping SMEs during this challenging period.”
Most platforms don’t think the government support will take business away from P2P lenders.
City superwoman Nicola Horlick, founder of P2P business lender Money&Co, said the demand for support will be so large that platforms would not be able to cope on their own anyway.
“So many businesses are experiencing disruption, so I think there will be plenty for all credit providers,” she told Peer2Peer Finance News.
“If the government hadn’t provided help, vast numbers of businesses would have gone into administration.
“The P2P sector is too small to cope on its own with the increased demand.”
David Bradley-Ward, chief executive of asset-backed P2P lender Ablrate, agreed that P2P lenders won’t lose business.
“The government support will be a help to the industry by giving alternative cashflow,” he said.
“If I were sat on a large book of unsecured loans to SMEs right now I would be most concerned, so the chancellor’s measures will be some comfort to those platforms.
“On a wider basis, I don’t think any lender will be sleeping well in the coming months however, it’s our job to assist SMEs and protect our lenders, so this is a challenge that we must meet.
“We are looking at the measures and seeing how we can guide our lenders to the loans and grants they are entitled to.”