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What’s going on with Tide and Starling Bank’s Bounce Back Loans?

There are two challenges facing not just fintechs, but all lenders who’ve recently been accredited.

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You might have noticed a recent flare-up of SME anger on social media over the Bounce Back Loan Scheme (BBLS).

Complaints have ranged from the speed at which cash is being lent out, to new customers finding themselves struggling to be approved for the BBLS.

So what exactly is going on?

Having dug into the issue, there are two challenges facing not just fintechs and digital banks, but all lenders recently accredited in the government’s BBLS:

1. Drip-feeding of BBLS funds

The first challenge is the lending limit placed on BBLS-accredited lenders.

Unsurprisingly with such a dramatic lending programme the Treasury, via the British Business Bank, has placed per lender limits on how much can be lent out.

These limits can be lifted, but only once the lender has reached them and goes through an approval process for a higher limit.

This is a far better situation than the government’s other coronavirus lending measures *cough* CBILS *cough* which originally required per loan approval by the powers that be.

However, it is still introducing a slowdown among some lenders. 

Tide, for instance, wrote to 30,000 customers on its BBLS waiting list (more on this below) yesterday to note that it was nearing the end of its limit, and would be phasing down lending until a higher limit had been approved.

Starling Bank doesn’t appear to have reached its limit, now with over £300m leant out, but will likely have the same issue at some point.

Adding to the confusion, banks aren’t able to disclose their limits, leading to guesswork at when the taps will be turned off (or turned down).

2. The new customer delay

Given the overwhelming demand for Bounce Back Loans, many banks have been forced to prioritise existing customers.

Tide’s approach was to implement a waiting list for the BBLS, while Starling Bank from today will prioritise the applications of existing customers.

The moves are similar to what high street banks are doing, many of which are prioritising existing customers and Lloyds Bank has taken the rather more dramatic step of stopping all new business account applications.

However, for challengers like Starling and Tide, this prioritisation of existing customers is an additional complication given they’re very much in the business of attracting new customers.

Both say they are committed to offering Bounce Back Loans to all their customers, however circumstances mean that new customers might find themselves at the back of the queue.

There is one additional complicating factor.

SMEs who’ve used the Current Account Switching Service to switch to a new business account recently will have found their previous account closed, and their relationship with that bank ended. 

This leaves those looking to access a Bounce Back Loan in a Catch-22 of being unable to return to their old bank for a Bounce Back Loan, and at the bottom of the list with their new provider.

In conclusion

The challenges mentioned above aren't unique to challenger banks or non-bank lenders, however they may be felt more acutely by these institutions and their customers as a result of:

  1. The speed at which fintechs can distribute funds (hitting lower lending limits earlier than anticipated),

  2. Their position as challenger businesses, with a high volume of new customers.

Neither of which is helpful for SME customers currently struggling to make ends meet during these chaotic times, but hopefully this provides some context to the challenges.

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