More peer-to-peer lenders need to be approved for the government’s emergency loan schemes for small- and medium-sized enterprises (SMEs) to prevent market instability, industry sources have claimed.
Several P2P insiders have told Peer2Peer Finance News that more P2P lenders need to be accredited under the coronavirus business interruption loan scheme (CBILS) to prevent some platforms having an unfair advantage over those which have not yet been accredited by the scheme.
And they claimed the government’s Bounce Back Loan scheme for small businesses could threaten P2P lenders that offer business loans worth £50,000 or less, because they won’t be able to compete with the government’s 100 per cent guarantee.
“Market stability is not there at the moment,” said Atuksha Poonwassie, co-founder and managing director of property-backed platform Simple Crowdfunding.
“A lot of businesses may not approach crowd platforms if 100 per cent government guaranteed funds are available to them. Access to this creates an unfair advantage for the marketplace especially when other lenders are struggling to raise funds.
“We’re still in the thick of the crisis and at the moment we can’t consider the long-term considerations because we don’t know how much longer it will go on for.
“I would’ve liked there to be help for businesses sooner. Many have challenges.
“But the situation does create a huge opportunity for alternative finance and it’s finding the best way to embrace that.”
This coincides with Peer2Peer Finance News’s ‘Back Our Industry’ campaign, which calls for the P2P industry to be utilised to its full potential amid the Covid-19 pandemic.
Daniel Rajkumar, founder and managing director of P2P business lender Rebuildingsociety, said that if other platforms aren’t supported quickly they’ll go out of business.
“Platforms will basically be competing with the government and their choice of which platforms to work with,” he said.
“That’s not true capitalism – capitalism involves market failures.
“It’s important more firms are invited to the scheme to come up with more competitive offers and businesses should have a wider choice of which institutions to borrow money from.”
Adam Tavener, chairman of Alternative Business Funding, echoed these views, and added that the same applies for the wider alternative finance industry.
“Having one group of lenders accredited and another not, will skew the marketplace,” he said.
“But the British Business Bank will be aware of this and is in discussion with a wide range of alternative finance lenders.
“The bank is responsible for protecting taxpayer money so do its due diligence thoroughly.”