Innovate Finance has called for alternative lenders to be given access to cheap funding and quicker accreditations to state-backed loan schemes after the sector deployed nearly a third of all coronavirus business interruption loan scheme (CBILS) loans to businesses last year.
The trade body estimated that despite initial obstacles and delays to obtaining accreditation, alternative lenders and smaller banks provided around 30 per cent of all CBILS loans to businesses in 2020.
Innovate Finance said that peer-to-peer lending platforms and other fintech lenders punched above their weight by providing over 20 per cent of all CBILS loans from when they joined the scheme, considerably above their overall market share of small- and medium-sized enterprise (SME) loans.
However, the trade body noted that most alternative lenders were unable to offer bounce back loans due to its low 2.5 per cent interest rate and not having access to cheaper wholesale capital like high street banks.
It has called for the Bank of England or British Business Bank to introduce a new facility to end this disparity.
Innovate Finance said that many alternative lenders are still in the queue to be accredited for the recovery loan scheme, which replaced previous support schemes including CBILS when it launched on 6 April and is set to run until the end of the year, subject to a review.
The trade body said that alternative lenders and their customers must be given fair and equal access to this and any future guarantee schemes.
“Alternative lending and challenger banks have been a great British success story, providing more finance to British businesses over the last decade,” said Adam Jackson, director of policy at Innovate Finance.
“Now is the time to unleash their potential and give them a fair chance to power SME growth and create jobs.
“Alternative lenders significantly outperformed on the delivery of CBILS and this demonstrates that alternative lenders will deliver loans to SMEs rapidly and in size and can do even more if they have equal opportunities.”