European peer-to-peer lending platform October has told its lenders what to expect when borrowers of state-backed loans request extensions to their repayments.
The platform has been participating in France’s €300bn (£259.5bn) state-guaranteed loan scheme to support small- and medium-sized enterprises during the Covid-19 crisis.
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Since June 2020, October’s institutional and retail lenders have funded 68 French state-guaranteed loans for a total amount of €13.17m. The platform will continue funding new loans under the scheme after the French government extended it until June 2021.
In December, the government announced that businesses that wish to delay the capital repayment of their state-guaranteed loan can now request a one-year additional deferral to their creditor, which will choose to grant it or not. Borrowers’ interest rates would increase if the loan is deferred.
When applying for the extension of the deferral period, the borrower will also have to indicate whether they will repay their loan immediately at the end of the deferral or whether they will spread the repayments over several years.
October said it will assess applications for deferrals on a case-by-case basis and will verify the company’s need to request the extra deferral period by requesting additional documents, studying the impact of Covid-19 on the firm’s sector.
The platform said if its committee accepts the application, it will ask lenders that financed the loan to vote on the additional deferral period.
If the majority of institutional and retail lenders in volume lent vote in favour of the additional deferral period, the extra 12-month deferral will be granted and the company will only repay interest during that time.
October said the interest rate lenders will receive will increase and the new repayments will be displayed in investors’ future transactions tab in their portfolio.
“From June 2021, we could start receiving some extension requests from borrowers who were granted a state-guaranteed loan,” October said in a blog on its website.
“Not all companies will request the additional deferral period. Nevertheless, you need to be prepared in case that happens.
“The October team is at your disposal for any questions you may have relative to this change.”