Legal complexities are creating challenges for peer-to-peer lending platforms seeking institutional funding to lend under the coronavirus business interruption loan scheme (CBILS).
Stuart Law, chief executive of Assetz Capital, which has conducted CBILS and non-CBILS lending backed by institutions, said lending through the emergency loan scheme is incredibly legally complex.
“You need a degree in rocket science to structure it or to employ two rocket scientists and their lawyers, it’s very detailed!” he told Peer2Peer Finance News.
“The legal structure and every other aspect, it’s very detailed compared to retail lending and normal institutional lending.
“It’s massively more complex than retail P2P lending and mildly more complex than non-CBILS institutional lending and you then have the government watching over you with their auditors. It’s tough.”
Folk2Folk has been lending throughout the pandemic and has institutional backing for non-CBILS lending but has not began lending under CBILS since its accreditation to the scheme at the start of July.
A spokesperson from the platform said that partnering with institutions for CBILS has proved more difficult and that the lender wants to take part in the successor scheme.
“Any arrangement we enter into with an institution has to be on the right terms for them, us and our borrowers so it’s not as straightforward as with retail investors,” the spokesperson said.
“It’s a little more complex with institutions, they have their own complex requirements which is why conversations are ongoing.
“We can’t lower what we offer borrowers or present a lower product to get institutions on side, we’re trying to be fair for all parties and finding the right terms.
“Any conversation with an institution about CBILS would have evolved to talk about non-CBILS. It’s harder to agree terms when its CBILS.”