Peer-to-peer platforms offering loans through the coronavirus business interruption loan scheme (CBILS) have the potential to make a real difference to small- and medium-sized enterprises (SMEs), a corporate finance expert has claimed.
James Lawson, corporate finance director at accountancy and business advisory firm MHA MacIntyre Hudson, said that now P2P firms are able to take part in the scheme, the sector can help SMEs through the current economic uncertainty.
“With traditional banks stretched with enquiries from their customers there’s an opportunity for P2P lenders to play a role in supporting business using CBILS,” he said.
“Because P2P lenders have tended to embrace technology to have more efficient back office systems there could be the scenario that once P2P firms are approved by the British Business Bank, they have the ability to process applications faster.
“But I think the challenge P2P lenders are going to have to overcome is the general willingness of those investors behind the funds.”
Lawson also predicted an influx of investors to P2P once the Covid-19 crisis subsides.
“I would expect that once things stabilise then investors would seek to maximise their return on capital and P2P lending provides a good opportunity to do that,” Lawson said.
“I foresee that some P2P lenders may encounter some trouble as a result of this crisis, but I think the model is a sound one in terms of the access to capital it provides and the ability for individuals to make a return of private capital, given that interest rates are unlikely to be increased in the foreseeable future.”
CBILS is aimed at SMEs with a maximum revenue limit of £45m while the Covid corporate finance facility is for larger lenders.
Therefore, Lawson said that he hopes the Treasury extends the maximum revenue limit on CBILS to allow greater funding for more medium-sized businesses.
“The definition of medium probably hasn’t been set at a sensible level at the moment and in a number of instances very good businesses are struggling to access funding through CBILS because their revenues exceed the maximum limit,” he said.
“I’m hoping the government will choose to extend that.”
Lawson said that a number of businesses have said they have a limited amount of cash to get them through.
“Globally governments are giving high levels of support,” he said.
“It’s the best assessment you can make given how fresh and fast moving the situation is.
“Clearly the economy depends on there being jobs for people to return to and the government seems to be doing everything it can to enable businesses to survive.”