The extended terms of the coronavirus business interruption loan scheme (CBILS) could disproportionately hurt CBILS-authorised peer-to-peer lenders who do not have access to the Bank of England’s term funding scheme, it has been claimed.
Following Chancellor Rishi Sunak’s announcement that CBILS borrowers can have an extra four years to repay their loans, concerns have been raised over the impact that this may have on the P2P lending community.
At present, P2P lending platforms are limited to using institutional investors to fund their CBILS lending. However, these institutional funding lines were put in place when borrowers were being given a six-year deadline to repay these loans. The deadline has now been extended to 10 years.
Peer2Peer Finance News is aware of at least one lender who has expressed concern about the viability of lending under the extended terms of the scheme, and industry stakeholders have commented on the particular risks that CBILS-authorised alternative lenders may face.
“I’m assuming that they will go back to the institutional funder and look to vary their terms,” said Frank Wessely, partner at Quantuma.
“They might look to refinance it as it becomes clearer to what extent the requests for extensions will materialise.
“I believe there will be a big take up of requests for extensions, depending on how the country recovers from this crisis. Platforms will have to look at matching their institutional funding facilities to the increasing lengths of loans if they want to increase CBILS funding.”
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It has been suggested that platforms may end up paying a higher cost of capital on the borrowers side, as a result of the extension and lack of P2P access to the term funding scheme. This may require platforms to introduce additional fees or to reduce their rates to investors.
Wessely has predicted that some CBILS-authorised alternative lenders could be offered access to the term funding scheme in response to the outcry over the extended terms of the loans.
“I can see that happening for those who have already had the government stamp of approval with CBILS authorisation, but I can’t see the door being opened wide for other platforms,” he said.
“But I don’t think we’ll see many more P2P platforms accredited.”