Despite helping to deliver much needed finance to businesses impacted by Covid-19, government emergency loan schemes are taking business away from some peer-to-peer lending platforms.
Platforms previously predicted that the government’s bounce back loan scheme for small businesses could threaten the growth of P2P lenders offering business loans worth £50,000 or less, because they won’t be able to compete with the government’s 100 per cent guarantee.
And now two P2P lending platforms have reported detriment due to government loan schemes.
Rebuildingsociety told Peer2Peer Finance News that it has seen a few businesses pull out of raising finance through the lender because they were able to receive a bounce back loan instead.
“We’re still lending and onboarding more appointed representatives as well as doing more privately syndicated loans for businesses wanting to borrow from stakeholders and we are continuing to grow that,” said Daniel Rajkumar, founder and managing director of Rebuildingsociety.
“The schemes are good for supporting businesses that need help and have good long-term prospects but they are also propping up a lot of businesses that are not sustainable.
“It’s good if you can deliver the scheme but it’s required a lot of players to develop relationships with institutional lenders pretty quickly which isn’t easy to do.”
Furthermore, LendingCrowd said the bounce back loan scheme and coronavirus business interruption loan scheme (CBILS) have contributed to a fall in responsible lending opportunities to new borrowers during the Covid-19 pandemic.
David Bradley-Ward, chief executive of Ablrate, said government schemes have led to unfair competition and market instability.
“I’m sure the government schemes have helped out a number of businesses, but not platforms that do unsecured loans of £50,000,” he said.
“I’d imagine some will have to rethink how they do things at the moment.
“If Funding Circle is allowed to deliver bounce back loans and the CBILS then how is anyone else going to compete with that?
“I think if unsecured loans is your bread and butter you’ve had it for the next three or so months until the bounce back loan scheme is over.”
However, ArchOver managing director Charlotte Marsh believes that CBILS creates an opportunity for P2P lending platforms.
She said that with banks busy with CBILS applications and many only serving their existing customers, P2P lenders can help fill the funding gap for businesses that require working capital but don’t meet the criteria for CBILS.
And some P2P lending platforms, such as property development lender Nexa Finance, have reported huge demand during this uncertain time.