Featured in AltFi:
We hear from the alternative lending
industry’s leaders on what we can expect over the next 12 months as the
pandemic continues to bite.
The global pandemic has wrought huge change
to the alternative lending industry. Initial concerns about the strength of
loan books and how the industry's first big economic shock would play out
quickly gave way to an opportunity to help distribute government-backed funds
to SMEs for some.
It is no surprise then that how these
hundreds of billions of pounds (globally) of government-backed loans perform is
central to our star panel of alternative lending leaders predictions for the
next 12 months.
Pent up
demand from SMEs for loans
Amany Attia, CEO, ThinCats
“2021 will present a different set of
challenges for lenders. Where 2020 saw lenders working with businesses in
response to the impacts of the covid pandemic, particularly around working
capital, 2021 will likely see a need for working capital and growth capital,
including for acquisitions, as the economy starts to expand once more;
businesses will need to address deferred debts such as tax or rental payments
and invest to make the most of the post-pandemic environment. With many lenders
having focused strongly on CBILS during the second half of 2020, we believe
there is a large pent up demand to fund transactions which didn’t qualify for
CBILS, such as MBOs, once CBILS applications close. The economic benefits of
national vaccination programmes will take some time to come through, so it will
be important for us to keep close to our existing borrowers to provide further
support where necessary. For the mid-sized sector on which we focus, our
ability to provide a personal, local and flexible service to advisers and
businesses remains key.”
Online
lending is here to stay
Lisa Jacobs, Europe Managing director,
Funding Circle
“Small businesses will play a key role in
powering the economic recovery. Whilst the challenges they face are not yet
over, it has been brilliant to see how small businesses have adapted and
navigated this pandemic. We welcome the Government’s commitment to introduce a
successor scheme after the CBILS and BBLS programmes end. Doing so will help
create a positive long-lasting lending environment where small businesses can
access the finance they need to invest, maintain and create jobs.” Online
lending is here to stay. The role of technology-led financing will continue to
grow in importance, due to the speed and simplicity it can offer. For CBILS
loans processed by our instant decision technology, businesses complete their
loan application in 6 minutes on average, receiving a decision in as little as
9 seconds and funds in accounts in 6 days. We are pleased to represent
25 per cent share of the number of CBILS loans approved since we began
participating in the scheme.”
Huge
defaults on Government-backed loans
John Davies, Executive Chairman, Just
Cashflow.
“In 2020 COVID-19 caused severe
problems for businesses and it was clear that fintechs were not seen as being
part of the solution. Intense lobbying eventually led to a number of fintechs
being approved to distribute CIBLS, however, this was without access to funding
costs at parity with traditional banks. It would be interesting to see just how
many of those eventually approved distributed any volume outside of refinancing
their own books. You have to have empathy for Tide who was the first fintech (and I think only) to be
approved for BBLS and then got cut off at the knees when access to additional
funding was required – in my opinion unfairly damaging their reputation. In
2021 once Government funding/support ceases there will be significant company
closures causing a huge range of defaults on Government-backed loans which in
turn will cause significant turmoil for those that distributed them. As a
result, we can expect there to be little or no further appetite to lend to
small businesses unless there is future Government intervention. For the
fintech sector, I can see no prospect of access to Government-sponsored cheaper
funding and this will inevitably cause liquidity issues (it doesn’t have to be
this way). Without the ability to scale there will be increased trading losses
and if there is no near term return to profitability VCs will also be hesitant
to back. As this unfolds I expect Vultures to circle. Not the most cheerful
predictions for 2021 but I expect the non-bank lenders who come out the other
side will have prepared for this.”
You can read the rest of the article here: AltFi
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