BoE accused of “setting the UK SME finance sector back several years” by excluding FinTechs from Covid-19 funding granted to incumbent banks

FinTechs and other non-bank lenders will not be able to access funding from the Bank of England that would help them deliver emergency loans, which has sparked accusations of the central bank hampering competition. 

The FinTech industry was cut out from accessing emergency funding for the loans to help businesses struggling due to Covid-19, according to a report in The Sunday Times.

FinTechs like Tide, which have been approved to supply so-called Bounce Back Loans to SMEs fighting for their survival, have struggled to get the funding to back up those loans. In Tide’s case, that meant the startup had to shut down its Bounce Back Loan scheme last week, leaving the customers relying on the neobank’s help feeling “gutted”.

Now, Simon Cureton, CEO of Funding Options, the business funding marketplace, is arguing that “the unintended consequence of the emergency loan schemes has been a serious reduction in the level of competition in the UK SME finance sector.

He continues to say that even though the government schemes to help struggling businesses “were well-intentioned, but they have disrupted and distorted the market negatively, setting the UK SME finance sector back several years.”

“Alt-lenders were largely excluded from the solution, having to lobby hard for accreditation to participate at all,” he says. “At Funding Options we have processed well over £100m of CBILS loans, but that figure represents a fraction of the billions applied for via our platform, due to the Alt-lenders’ inability to operate effectively at this time.

“Ring-fencing the cheap Bank of England capital required to sensibly offer these emergency loans has led to some high-profile difficulties for challenger banks and non-bank lenders. The big banks have asked why they should help out their competitors and aren’t prepared to give support without any return.

“The government may have unwittingly created this situation but now it needs to step in to solve it. Without greater liquidity we may see some alt-lenders cease trading and a flourishing new FinTech sector regress years in the space of a few months. And those who will suffer most are the small businesses already facing a level of economic uncertainty never experienced in our lifetime. They deserve choice, fast decisions, and innovation that identifies and responds to nuanced situations. When CBILS and BBLS are consigned to history, the legacy should not be a return to pre-GFC days for the once thriving UK fintech and SME finance sectors.”

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