Nine in 10 of Funding Circle’s business borrowers have resumed their monthly repayments, as the peer-to-peer lending platform introduces a formal extension plan for borrowers who have taken a payment break due to Covid-19.
In a note to investors, Funding Circle revealed that “more than 90 per cent of UK borrowers are now making their monthly repayments”, approximately eight months after the pandemic forced a number of businesses to take payment holidays.
The lender also told investors that it has begun to offer businesses the opportunity to formally extend the term of the loan to account for any missed payments in the year to date.
“For example, if a business took a payment holiday for three months, the term of the loan would be extended by three months,” said Funding Circle.
“The extension will mean a business goes from being in arrears for these missed payments to being current again, helping them get back on their feet and moving them further away from the potential of default should they miss any future payments due to the ongoing uncertainty. If they subsequently miss any repayments, they will once again fall into arrears.”
This follows recent guidance from the Financial Conduct Authority that says that borrowers should be offered payment deferrals of up to six months, where appropriate.
Earlier this month, Zopa announced that it was extending its support to borrowers impacted by the pandemic as England prepared to enter a second lockdown.
However, Funding Circle has predicted that the second lockdown will not have the same economic impact as the first lockdown.
“With further national restrictions now in place, we continue to monitor the impact this could have on the loan book,” said Funding Circle.
“Whilst it is still early and there continues to be a great deal of uncertainty, initial indicators suggest the second lockdown is not having the same immediate impact as we saw in the early days of the first lockdown in March.
“With this being said, we are always looking at how we can adapt to best protect your portfolio and will continue to do so in the coming weeks and months.”