By Daniel Lanyon on Thursday 2 April 2020
With the economy in a perilous state, the Government is planning on injecting hundreds of billions of pounds in stimulus but questions remain about it how it will utilise non-bank lenders in the fintech sector.
The UK’s fintech lending industry can deploy substantial amounts of loans to small businesses to help shore up the economy, according to Rob Straathof, CEO of Liberis, who says the British Business Bank and the Government should urgently enlist their help.
Under plans drawn up by the Chancellor Rishi Sunak, the Government will guarantee up to 80 per cent of billions of pounds of loans made to small businesses via certain lending institutions in a bid to help struggling firms with cheap liquidity backed by the state.
Five of these lenders - including Aldemore Bank - have temporarily withdrawn from the Coronavirus Business Interruption Loan Scheme, Bloomberg reported yesterday. Others including digital bank Tide says the scheme is available through too few lenders and the scheme itself is not fit for purpose during this crisis.
Among those approved for those CBILs, many of the best-known fintech lenders making a notable absence.
“I urge the British Business Bank and the Government to involve the companies that have been so relevant in keeping small businesses afloat and to give them the opportunity to participate in, in their funding,” Straathof said.
“Give us the means and the protection to give every single small business that we would normally underwrite, £10,000 or £15,000 that we can lend at a very low rate than we can collect that is backed by the government,” he added.
"If there is upside we share it with the government and if there's downside the lenders will make very little money, but at least the government gets all the beneficiary effects such as keeping people into jobs, no unemployment, and suppliers getting paid."
Several industry figures have said that the scheme risks be swamped with applications from firms, with the deployment of capital likely to be slow in its current form.
“You have a group of highly evolved and highly goal aligned companies that can take care of distributing the [CIBL] package. They have the underwriting methodology in place that allows them to underwrite their businesses in days,” said Straathof.
Liberis, Straathof says, can “easily” lend to 10,000 separate businesses - and £100m based on an average £10k size of the loan - in a month.
"If you have multiple companies, you can distribute a billion easily in one month and then you all of a sudden can cover 100,000 small businesses. That's where it becomes meaningful," he said.
“Most of us have highly automated underwriting. So in terms of between a company applying and a company actually getting the money into your account, maybe same day, or within a few days. That's the power versus banks who need a long underwriting process,” he added.