Tide under fire over lack of Pay As You Grow repayment option for SMEs

By Oliver Smith on Tuesday 10 August 2021

Alternative LendingDigital Banking

The lender blames its lack of access to Bank of England funding.

Tide under fire over lack of Pay As You Grow repayment option for SMEs
Image source: Oliver Prill/Tide.

SME banking provider Tide is facing criticism from the British Business Bank for failing to offer the Government’s “Pay As You Grow” repayment option for Covid loans to its borrowers.

Richard Bearman, managing director of small business lending at the British Business Bank said Tide had “not met” expectations and was “really disappointed” with the decision.

His comments, which came during an online event and were reported by The Times, add to the pressure faced by Tide from its thousands of SME customers who borrowed under the Bounce Back Loan Scheme (BBLS).

Tide lent around £58m to 1,812 customers through the BBLS in 2020, before it was forced to stop lending as its funding ran out.

At the start of 2021 “Pay As You Grow” (PAYG) was launched to help BBLS borrowers spread the cost of their debt over an extended period, however, the longer-term would have to be funded by Tide itself as there’s no Bank of England or Government funding for non-banks.

“Due to the nature of the way the BBLS and PAYG are funded, Tide has taken the difficult decision to not offer PAYG, as we would be unable to fund an extension for all BBLS members,” the lender wrote on its support page.

The British Business Bank cannot force lenders to offer PAYG; however, most bank lenders have been quick to adopt it as they can tap into low-cost Bank of England funding.

Tide meanwhile spent much of last year campaigning for access to the Bank’s 'Term Funding Scheme', along with several non-bank lenders, but this has so far been unsuccessful.

A Tide spokesperson told AltFi that only "a small proportion" of its borrowers had asked for PAYG: “However, unfortunately, it has not been possible for Tide to offer PAYG. As an alternative lender we do not have access to Bank of England funding, like the high street banks, which makes participating in BBLS and PAYG straightforward for them."

"We would need to refinance the loans with our external funder over a longer period, which is not possible. We will continue to lobby for access to BoE funds to ensure that non-banks can take part in future schemes on the same terms as the other participants, in addition, we are working with Tide members struggling to make BBLS repayments to look at other options.”

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