Peer-to-peer lenders would have performed a better job of delivering emergency loan schemes than the banks, David Bradley-Ward, chief executive of asset-backed lender Ablrate, has claimed.
Only two P2P lending platforms, Funding Circle and Assetz Capital, have so far been accredited by the British Business Bank to deliver the 80 per cent government-backed coronavirus business interruption loan scheme (CBILS). Funding Circle is also working to expand into bounce back loans, which come with the 100 per cent government guarantee on the value of the loan.
Bradley-Ward (pictured) criticised banks for the slow pace of delivering CBILS funds and argued that P2P lenders would do better due diligence on borrowers.
His comments come as research from the Business Banking Resolution Service showed that 43 per cent of business which had accessed government-guaranteed loan schemes said they do not expect to repay them.
This was either because they do not think they will be able to, or because they do not believe that the government will pursue the debt, even though this is a matter for the banks.
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“There will be bankruptcies on the back of bounce back loans,” Bradley-Ward said.
“It’s likely in the coming years the government will be forced to offer loan forgiveness or turn loans into grants.
“It would have been better for them to be issued by P2P lenders. There would have been a large spread of people looking at businesses, creating automated systems with certain algorithms and credit scores which wouldn’t have taken long to administer and would have been a lot better.
“As well as P2P lenders, I think it would have been better if alternative lenders, rather than the banks, were delivering the schemes because there would have been more due diligence and money would have been out of the door quickly and more responsibly.”
Bradley-Ward said the 100 per cent government guarantee on bounce back loans means that banks are under no obligation to lend responsibly, so may be lending to businesses that were going to collapse prior to the Covid-19 pandemic.
Bradley-Ward also suggested that banks may opt to lend smaller amounts under the bounce back loan scheme due to the full government guarantee, rather than a larger CBILS loan even if it were more appropriate.
“Banks have delivered a lot more bounce back loans than CBILS,” he said.
“If someone is dying of thirst, one sip of water is not going to save him.”
Peer2Peer Finance News’ ‘Back Our Industry’ campaign is calling for the government to utilise P2P lending platforms more, in delivering funds to small businesses and housebuilders.