Peer-to-peer lenders are gearing up for a successor to the government’s emergency lending schemes and are involved in early discussions this time round.
It is understood that the alternative finance industry is feeding into the latest government plans to formulate a new support programme for businesses impacted by the pandemic, which will be introduced after January 2021 once the coronavirus business interruption loan scheme (CBILS) and bounce back loan scheme (BBLS) end.
Applications for CBILS and BBLS were due to close in November but were extended last month until the end of January 2021. Chancellor Rishi Sunak had said in his winter economy plan in September, before the extension was announced, that a successor loan programme would begin in January.
P2P industry figures are now hoping that the new scheme will be introduced in February rather than another extension being granted. There was criticism when CBILS was first formulated earlier this year that alternative lenders weren’t involved in initial discussions.
But Mike Carter, head of lending at P2P trade body the 36H Group, said platforms are feeding into these changes.
“People are happy with the extension to January as there was a backlog,” he said.
“The government is looking at bringing in something else longer term but this won’t be ready until sometime in the new year.
“CBILS had to be extended to fill that gap.
“I think people are of the view that they should keep to the deadline and be ready to bring in something new.”
Funding Circle, which was the first P2P lender to become accredited by the British Business Bank to provide CBILS, said it would welcome a new scheme.
“By extending CBILS, the government is providing small businesses with much-needed support during an acute phase of the pandemic,” Lisa Jacobs, UK managing director for Funding Circle, said.
“As we look to the future, we welcome the successor loan programme, so small- and medium-sized enterprises (SMEs) can go on to invest, create jobs and drive the economic recovery.”
The new lending scheme is not expected to retain the 80 per cent government guarantee which is provided for the value of CBILS loans.
Stuart Law, chief executive of Assetz Capital, also an accredited CBILS lender, said he expects the successor programme will be ready in February to boost the UK economy.
“Next year we have a very deep recession to come out of and that means it’s incredibly important there is a successor scheme to CBILS that is perhaps not as generous,” he said.
“The provision of government guarantees is what will keep lending flowing in 2021 and we are fully expecting another scheme to immediately follow CBILS that will be ready for applications at the start of February.
“That’s our recommendation, a replacement scheme without the first year of the government paying the fees.”
Roy Warren, managing director of CBILS accredited lender Folk2Folk, said the current extension and possibility of a successor scheme gives it more time to fund loans under its accreditation providing it finds suitable institutional funders. There are, however, some fears that providing further government support could harm other types of lending.
Katrin Herrling, founder of business finance aggregator Funding Xchange, said the number of lenders funding deals through the platform returned to pre-pandemic levels in September.
“The problem for lenders is their balance sheets have reduced significantly,” Herrling said.
“If you don’t have money out the door then the new threat is from loss of income.
“Extending CBILS beyond January risks killing off other lending activity by those actively looking to put money out as they can’t compete on the funding costs.”
She said any replacement scheme needs to focus on real gaps in the market and not undermine lenders trying to return.
“A new scheme should close the gap where there isn’t lending and use the alternative finance sector to give them access to subsidised funding,” she added.
“There is a good case to make to see how the market bounces back after CBILS and to be ready if a new scheme is needed.”
“We are now having discussions with the government, trade associations, lenders and other stakeholders on the future design of the new scheme, which is expected to become operational in early 2021,” said the British Business Bank.
“We are unable to comment further on these commercial discussions.”
The Treasury declined to comment.