The peer-to-peer lending industry has had a mixed reaction as to whether the coronavirus business interruption loan scheme (CBILS) has been a success so far.
The industry reviews follow the recent extension of the 80 per cent government-backed scheme, which has seen its application deadline extended from 30 September to the end of the year.
As of 20 September CBILS carried a loan approval rating of around 47 per cent whereas the bounce back loan scheme (BBLS) has approved 81 per cent of loan applications, but Stuart Law, chief executive of CBILS lender Assetz Capital, pointed out that the approval figures are difficult to compare because the two schemes are so different.
It’s a huge improvement from its previous Enterprise Finance Guarantee scheme (EFG), he added.
“I think CBILS has definitely been a success even though it has not gotten the approval ratings of BBLS loans,” Law said.
“BBLS with the 100 per cent government guarantee has lent money to people who can automatically tick a handful of boxes and that’s why it’s so easy and there’s so much fraud, while CBILS has far tighter rules and quite precise criteria so it doesn’t surprise me some companies can’t pass that.
“CBILS came out of the old EFG loan scheme and that it was very difficult to pass the tests for, so I would say CBILS is an awful lot easier than that.
“If we had to apply the old EFG rules no one would have lent very much at all. CBILS has been a great success.”
Law said many fintechs that did not qualify for CBILS due to their losses, were instead helped by the future fund aimed at innovative companies, and have now been aided by a rule change last week.
Businesses that lost more than half of their equity starting up were locked out of taking advantage of CBILS by triggering the tick box of being a firm in financial distress. But according to Law, the British Business Bank has said these firms can now restructure to allow suitable companies to pass this test.
“This is a very good example of the British Business Bank in extraordinary circumstances listening to problems,” he said.
However, David Bradley-Ward said the scheme has been a failure, having deployed just £15.24bn as of 16 August, out of the £330bn Chancellor Rishi Sunak promised to deliver to firms.
“No one can call that a success,” he said.
“It was an interesting concept, but the banks were never going to lend much under the scheme unless they were forced to, so it’s been a total disaster. It was poorly managed.
“It’s better than nothing, it has benefitted some businesses, but I would have got alternative lenders involved more, given banks a target to lend at and have opened it up to retail lenders.”
Lee Birkett, founder of JustUs, said CBILS did a good job of injecting much-needed cash into the economy, but has been a failure.
He said this is because not enough funds were deployed due to the underwriting requirements from banks, and CBILS loans mostly went to people with less risk that did not need them.
“I said from the outset that CBILS needed a 100 per cent government guarantee to help the businesses that need it the most,” Birkett said.