Trade body head calls for urgent action to support non-bank lenders
The head of a lending trade body has urged the government to open up the Term Funding Scheme for small- and medium-sized enterprises (SMEs) to non-banks as a matter of urgency.
Stephen Haddrill, director general of the Finance & Leasing Association (FLA), said that the non-bank lending sector relies heavily on capital markets and bank funding, two sources of finance which are currently closed, so these lenders will not be able to provide new lending as well as forbearance.
He said that opening up the Term Funding Scheme to non-bank lenders will help remedy the situation.
This Term Funding Scheme, launched in 2016, was designed to encourage banks and building societies to expand their lending to SMEs by providing funds at cheaper rates.
Read more: Use bank referral scheme to speed up emergency SME loans
Read more: P2P industry urges faster roll-out of Covid-19 loans scheme
“When you consider that these finance companies provided £46bn of funding during 2019 to SMEs for business investment and point of sale finance for consumers, that would be a huge loss to the economy right at the point when funding will be needed to help the UK recovery,” Haddrill told the Treasury select committee of MPs this week.
“To remedy this, we want to see the Term Funding Scheme opened to non-bank lenders as a matter of urgency, and eligibility criteria streamlined to fast-track firms which are FCA regulated or already part of a British Business Bank scheme.”
Haddrill also urged for changes to the Consumer Credit Act (CCA) to speed up help for customers in financial difficulty.
“The CCA includes formal and complex modifying agreement provisions which requires a new agreement to be sent to the customer, signed and then returned before they are activated,” he said.
“Imagine how labour-intensive that process is when multiplied by the number of customers seeking forbearance.”
Read more: Consumer finance market grows at strongest rate in 11 months