The health crisis has turned into a financial crisis with only 6000 businesses who have applied for the Coronavirus Business Interruption Loan Scheme (CBILS) having so far been approved by the Government’s accredited distributors of the scheme, the banks.
Clearly the banks are inundated with applications. But it’s not just the struggle to get on top of the deluge that is resulting in low approval numbers. When it comes to accessing bank business loans it’s still a case of ‘computer says ‘no’. The net result is that the largesse of government is not being passed on to the very businesses it’s earmarked for. Concern has also been raised regarding the level of interest rate businesses will be obliged to pay after the initial 12 months of 0%.
The core issue, however, remains that there is a bottleneck. It’s not easy to make inroads when applying for a bank business loan. Bank processes aren’t swift enough, applications are in gridlock and there are a lot of very worried business owners at the wheel. Banks are finding they aren’t able to receive, assess, approve and distribute fast enough. Help is needed.
Alternative finance provides a ready-made solution. After all, the sector originally came into being to fill the funding gap left by banks after the last financial crisis and now it’s all set up and ready to play its part in helping during this national crisis. Until today however, the peer to peer (P2P) sector has been excluded from playing a role.
FOLK2FOLK has applied to the British Business Bank to become accredited to distribute CBILS and believes the P2Ps can contribute speed and the ability to say yes to credit-worthy businesses where banks may say no. Today Funding Circle, the UK’s largest peer to peer platform, was the first peer to peer platform to be accredited and we hope they are the first of many as only then will the bottleneck be resolved.