Business advisory experts have welcomed the government’s new insolvency bill, stating that it will benefit peer-to-peer lending platforms.
The Corporate Governance and Insolvency Bill, which is in its second reading in the House of Commons and expected to be passed in the coming weeks, introduces measures to protect struggling businesses from having to file for bankruptcy due to Covid-19.
The most prominent feature of the bill is that it will introduce a moratorium to give companies breathing space from their creditors while they seek a rescue.
Frank Wessely, partner at advisory firm Quantuma, said the moratorium will give small- and medium-sized enterprises (SMEs) time to turn their situation around, and this could be of benefit to the P2P lending platforms which fund them.
“The moratorium will be a very useful tool to enable a board of directors to focus on turning the company around and not fight constantly because it provides protection from creditors chasing for payment,” he said.
“It’ll be used for SMEs that can be saved. I think that distressed P2P lending platforms could take advantage of the moratorium provisions as they stand.
“Also, repayments due to platforms from SME borrowers look to be exempt and therefore remain payable and unaffected by the moratorium procedure.
“Bear in mind that the bill is only at the second reading stage in the Commons and it still has to pass through the Lords, so things could be amended.
“There is some light at the end of the tunnel and businesses are taking baby steps. We are trying to make sure platforms are fit to emerge from the lockdown.”
Benjamin Wiles, managing director of restructuring advisory for Duff & Phelps, agreed that the moratorium will be effective, as it will give lenders more time to look at the options available and it could benefit P2P lenders that provide unsecured loans in particular.
“All lenders will benefit from the moratorium,” he said.
“And talking about P2P lenders in particular, a lot of those loans are often unsecured which really gives them the opportunity to benefit from a well thought out and non-restrictive solution.
“I think the recovery from Covid-19 presents an opportunity from alternative lenders to support businesses through this time.”