Firms that have taken out bounce-back loans (BBLs) from non-bank lenders may have difficulty accessing further funds as alternative lenders seek funding.
The Treasury Department was forced to introduce top-ups and extend the application deadline for the 100 percent government-backed loans to January after England was locked again last week.
Starting tomorrow, SMB owners who have raised less than £ 50,000, or 25 percent of the BBL’s turnover limit, can apply for top-up loans to get them through another lockdown.
However, the non-bank lender Tide – which has no deposits and no access to cheap funding for licensed banks – is struggling to secure the funding needed to provide BBL top-ups for its customers.
Kevin Hollinrake, chairman of the all-party parliamentary group (APPG) for fair banking, said City AM that increases could create a “two-tier system” in which SMEs that do banking with non-traditional lenders are “particularly disadvantaged”.
Hollinrake added that the introduction of top-ups “doesn’t solve the problem of getting no credit at all”. “For many people this is existential, it is the difference between success and failure,” he said.
Tide loaned nearly 2,000 small businesses over £ 50 million under the BBL program but was forced to close applications in July after the funds ran out.
Unless Tide can secure funding from private donors or the cheap loans the Bank of England is making available to banks, it will not be able to reopen BBL applications or provide top-ups. City AM understands.
This would leave few options for Tide customers trying to secure more BBL funds, as all but one of the 28 lenders accredited under the program have now closed applications from new customers.
A Tide spokesperson said he was aware of the announcement that BBL recharges would be introduced but added, “Tide has not yet received an official notice and so cannot comment at this point.”
Non-bank lenders Funding Circle and Capital on Tap and Funding Circle are also BBL accredited lenders. Funding Circle said BBL customers could register their interest in top-ups starting tomorrow, while Capital on Tap did not respond to a request for comments.
“We have consistently warned the government about the possibility of corporations accessing these loans, and there are real concerns that corporations – and lenders – will be excluded,” said shadow economy secretary Lucy Powell.
“There should be a level playing field for all businesses and lenders, and the government must act to ensure that funding is available to those who need it,” Powell said City AM
Hollinrake said the ability to give non-bank lenders access to the Bank of England’s long-term funding program for small business lending ensures that all eligible businesses could receive BBL top-ups if needed. The program has made it easier for banks to borrow cash to fund BBLs.
The Conservative MP said banks with access to the funding program could lend money to non-bank lenders so they could spend BBLs to help solve the problem. He also suggested that the Treasury Department could provide funding for the lenders to the state-owned British Business Bank, which manages the BBL program.
“One way or another, there are a number of different solutions that are beyond the human mind and could be introduced very quickly,” said Hollinrake.
The Bank of England declined to comment on the possibility of expanding access to the term funding system. The Ministry of Finance also declined to comment.