We have been approved by the British Business Bank as a new accredited lender to provide loans through the Coronavirus Business Interruption Loan Scheme (CBILS). We are currently accepting applications from existing borrowers only.
Opportunity knocks for non-bank CBILS lenders
The full economic impact of the coronavirus crisis and how quickly we return to pre-covid levels of economic activity is difficult to predict. Whatever shape any recovery might look like – take your pick from “V”, “U”, “W”, “L” etc – businesses that rely on gatherings of people being in close proximity to each other are likely to take the longest to recover: hospitality, aviation and leisure are obvious examples and for whom an effective vaccine can’t come soon enough.
The government response to supporting businesses has been substantial including cash grants, business rates holidays, tax deferral schemes, government backed loans through CBILS and job retention schemes. As the crisis has unfolded new initiatives such as the Future Fund, Bounce Back loans and CBILS’ big brother CLBILS have been announced to help those businesses not captured by the original schemes.
The Government seems keen to learn from the lessons of the 2008 financial crisis when measures to protect banks’ deposit holders led to a lack of vital liquidity for businesses. This was the catalyst for the birth of the alternative finance sector including ThinCats.
Since then non-bank lenders and challenger banks have been taking an increasing share of the business lending market from traditional bank lenders: according to the British Business Bank, more than half (52%) of smaller businesses that sought finance in 2019 contacted a finance provider outside of the ‘Big Five’ banks.
In terms of using non-bank lenders to support its CBILS programme, however, it’s only very recently that marketplace lenders such as Funding Circle and ThinCats – approved by the British Business Bank as accredited lenders on 17 and 27 April respectively – have been recognised by government as having a role to play. Other non-bank lenders will no doubt follow in due course.
The opportunity and challenge for these newly accredited lenders, including ThinCats, will be to show how they can add real value in an environment where loans are underwritten by an 80% government guarantee, where there is a real need for speed for some businesses to access new finance, and where we may see businesses that typically avoid taking on debt, looking for funding solutions for the very first time.
For these “first-time” borrowers the need to take advice is key to finding the right funding for their needs, and helping them navigate the funding process as quickly as possible.
Unlike the high street banks, marketplace and altfi lenders don’t need to be all things to all people so it will be interesting to see which part of the CBILS market they choose to engage with. It’s no surprise that a high volume, online lender such as Funding Circle is focusing on unsecured loans up to £250k.
For our part, ThinCats has announced that we will be using our CBILS capability initially to support existing borrowers as we know their businesses well and can provide funding most quickly.
We will announce our CBILS plans for new borrowers in due course, however, we are likely to focus on lower volume, higher value loans to mid-sized businesses. This plays to our strengths in creating highly bespoke funding solutions built around a flexible credit policy and high levels of personal service.
As the British Business Bank continues to widen the scheme, we look forward to seeing where future CBILS accredited non-bank lenders will choose to focus their resources.