Several peer-to-peer lending platforms that wanted to take part in the coronavirus business interruption loan scheme (CBILS) have halted their applications, amid concerns of an uneven playing field between banks and non-bank lenders.
Only four P2P lenders – Funding Circle, Assetz Capital, Folk2Folk and LendingCrowd – have been accredited to the emergency scheme, which is 80 per cent government guaranteed and provides loans from £50,000 to £5m.
Lee Birkett, founder of JustUs, said the platform paused its CBILS application after reports emerged that alternative lenders had been excluded from indirectly accessing Bank of England funding.
Non-bank lenders cannot access the Bank of England’s Term Funding Scheme, which offers four-year funding at or very close to the base rate to encourage lending.
A report last month in The Sunday Times said that high street banks had blocked proposals to allow alternative lenders to have access to the scheme during the pandemic. “We were always pushing for direct funding from the Bank of England,” said Birkett.
“At the moment, the only lenders with the balance sheet to lend at scale are the banks, so there’s no point going live with £20m when we were going to have demand for a billion. We may revisit this if the government changes its policy.”
David Bradley-Ward, chief executive of asset-backed P2P lender Ablrate, said he wanted his platform to be accredited for CBILS but doesn’t believe this will happen. As the scheme ends on 30 September, the British Business Bank (BBB) is more likely to focus on larger lenders that can deliver more money and quicker, he said.
Instead, following “good conversations” with the state-backed development bank, he believes Ablrate will be accredited to other programmes to help small- and medium-sized enterprises, most likely after the bank’s attention is turned away from CBILS when it ends.
P2P business lender ArchOver told Peer2Peer Finance News that it stopped pursuing its CBILS application because the scheme needs institutional funding, whereas the majority of its investors are high-net-worth individuals and family offices.
Additionally, some P2P platforms have voiced reluctance to apply for accreditation for the bounce back loan scheme (BBLS), which provides 100 per cent government-backed loans of up to £50,000.
Funding Circle is the only P2P platform that has been approved to deliver BBLS to date.
LendingCrowd said the cost of capital prohibits the platform from offering BBLS, blaming lack of access to the Term Funding Scheme, so is instead focusing on CBILS. And Stuart Law, chief executive of Assetz Capital, said that the platform has no intention of applying for BBLS.
“It’s impossible to fund unless you’re a bank and it’s completely not our customer type either– it’s typically for micro businesses and seems to have much higher fraud risk than our types of lending,” he said.
However, other P2P lending platforms are still looking to provide the emergency loan schemes.
Crowd2Fund is already accredited for CBILS and plans to offer the loans once it relaunches, while Rebuildingsociety is currently looking to secure institutional funding before applying for CBILS.
Crowd2Fund is already accredited for CBILS and plans to offer the loans once it relaunches and focuses on lenders that can deliver the money.
The spokesperson added that the lack of access to Bank of England funding is more relevant for BBLS than CBILS, as platforms should be able to raise the finance for CBILS.
The Bank of England declined to comment about access to the Bank’s Term Funding Scheme.