Peer-to-peer platforms and other alternative lenders are offering reduced rates to borrowers who apply for a loan through the government-backed coronavirus business interruption loan scheme (CBILS), Peer2Peer Finance News has learned.
Assetz Capital, Funding Circle and MarketFinance are all offering CBILS borrowers reduced rates on their loans, while alternative lender iwoca has offered zero per cent interest on any CBILS loans which are paid off within 12 months.
All CBILS loans come with a 12-month interest free period, and each loan is partially guaranteed by the government. This has allowed CBILS-approved lenders to offer lower-than-usual rates due to the reduced level of risk associated with the loans.
“Because of the subsidy and the government guarantee – the subsidy being that the government is paying for the first year’s interest – we can offer a lower interest rate to borrowers,” said Bilal Mahmood, director of media and external relations at MarketFinance.
“I think what the government is buying into is our risk models. The government – specifically through the British Business Bank (BBB) – is giving us the nod to start lending, and what that says is that ‘these risk models aren’t as infant as we once thought’.
“They’ve seen our books and because the BBB has worked with us for years, they know that we have a strong risk model and credit appetites that are good.”
MarketFinance is offering CBILS loans with interest rates starting from 1.92 per cent APR. Meanwhile, Funding Circle has cut its average borrower rate by one per cent, and Assetz Capital’s chief executive Stuart Law told Peer2Peer Finance News that “Assetz is charging a little less than previously because of the benefit of the CBILS guarantee.”
Business lender ThinCats said that it was charging the same rate for CBILS loans to existing borrowers as for their existing loans.