The government has been urged to utilise alternative lenders alongside clearing banks to support small- and medium-sized enterprises (SMEs) hit by Covid-19.
Douglas Grant, director of business and commercial loans firm Conister Finance & Leasing, said that alternative lenders understand the needs of specialist SMEs and have the infrastructure and technology in place to support them during the pandemic.
Despite clearing banks working hard to provide emergency loans, a lot of SMEs will become unsustainable, so alternative lenders need the same access to cheap Bank of England funding to help these businesses, Grant said.
“It was concerning therefore to see that alternative lenders are potentially unlikely to receive much financing from the Bank of England to deliver emergency government loans,” Grant said.
“It is crucial that clearing banks pass on finance from the Bank of England to alternative lenders and find a way to make it work on commercial terms.
“SMEs must have a tripartite level of support from government, alternative and traditional lenders working together in these difficult times.”
Grant also said that alternative lenders have the knowledge and flexibility to provide finance to the most resilient SMEs who may be looking for growth capital and acquisition opportunities at this time.
“Without legacy loan books and unencumbered by coronavirus business interruption loan scheme applications coupled with high levels of dry powder, alternative lenders working together with clearing banks can help to execute rapid credit decisions on flexible terms,” Grant said.
“The UK business sector as a whole needs both more financial support for the alternative lending sector which is working together with traditional banks but also more sustainable initiatives to support SMEs in more resilient sectors from the Bank of England as we come to terms with an increasingly capital hungry economy – an issue that necessitates urgent attention.”