Institutional funding drought hits CBILS participation
Some alternative finance platforms may be unable to participate in government emergency loan schemes due to a shortage of institutional funding, industry stakeholders have warned.
Andrew Holgate, chief executive of fintech consultancy Equitivo said that Covid-19 caused institutional funding to dry up, and now institutions are losing appetite for government emergency loan schemes.
Read more: What CBILS deals are alternative lenders offering?
“A lot of big institutions were prepared to put money into some of these platforms a few months ago with the government guarantees in place from the British Business Bank, but that seems to have dried up a little,” said Holgate.
“This was partly due to the actual understanding of how guarantees work and there’s questions around the actual strength of these portfolios being built.”
For the cost of capital to participate in the bounce back loan (BBL) scheme and deploy these loans, platforms would need access to cheaper money from the Bank of England’s Term Funding scheme, Holgate added.
Earlier this month it was reported in the Sunday Times that large banks had blocked non-bank lenders, including P2P lending platforms, from having access to this scheme.
Stuart Law, chief executive at Assetz Capital, which was approved to participate in the scheme in May, said that to attract institutional capital for CBILS, platforms have to be at a certain size and scale.
Law said he has noticed more interest from institutional investors for the government’s emergency loan schemes but most of these have been from prior relationships.
He added that if institutional lines are not already in place now it would be too late to start any substantial lending under CBILS before the scheme is set to end on 30 September.
Read more: ‘Skin in the game’ requirement for CBILS may be hurdle for P2P lenders
“It requires substantial track record and scale in existing good-quality small- and medium-sized enterprise lending, as well as due diligence by the institutions, already mostly completed or completed, due to the short-time frame before CBILS ends in September,” he said.
Law has called on the government to extend the loan scheme in order to give lenders more time to attract the investment needed to deliver these funds.
