‘Skin in the game’ requirement for CBILS may be hurdle for P2P lenders
Only a handful of peer-to-peer lenders have been accredited under the coronavirus business interruption loan scheme (CBILS) in the first few months of its operation, with some platforms citing the ‘skin in the game’ requirement as a hurdle for the P2P industry.
Funding Circle and Assetz Capital were the first P2P lenders accredited by the British Business Bank (BBB) to deliver the government-backed emergency loan scheme, followed by LendingCrowd and Folk2Folk.
Peer2Peer Finance News launched its ‘back our industry’ campaign in May, urging the government to recognise the vital role P2P platforms can play in supporting the economy.
Lee Birkett, founder of P2P lender JustUs, said there is a requirement for lenders to take a first loss on loans before the government, which he is unwilling to do. “A first loss is a lot of risk for the private sector to take,” he said. “We will look at an alternative solution if we can’t get approved.”
Read more: What’s next for our ‘Back Our Industry’ campaign?
However, Chris Hancock, chief executive of Crowd2Fund, and Stuart Law, founder of Assetz Capital, were comfortable with taking a first loss on loans. “[Assetz] can’t comment on the exact first loss requirement percentage as I’m sure that is relatively private between each lender and BBB,” said Law. “This seems very sensible to help ensure quality of lending and it certainly applies to us.”
Peer2Peer Finance News understands that the BBB has disputed the idea that it mandates a first loss requirement although it has told platforms they need skin in the game. It is thought that it is down to platforms’ interpretation of the guidance and that some have decided to see this as a first loss requirement. A BBB spokesperson highlighted the guidance for accredited lenders.
“If you have a business model that does not fit the CBILS standard legal agreement, your application will be considered using a risk and judgement-based approach which will appraise (among other matters) whether your business model fulfils the underpinning principle of CBILS (the risk sharing and alignment of interests between the UK government and the delivery partner, which requires the originator to have a financial interest in the performance of the portfolio through the investment of its own funds) and your ability to deploy,” the guidance said.
