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Fintech lender Funding Options sees £1bn spike in loans from small firms frustrated by high street banks

Small business lender Funding Options said it received thousands of applications worth over £1bn in March from crisis-strapped businesses, a huge spike compared to previous months. Small business owners said the government’s emergency coroanavirus loans are being denied to them as major banks such as HSBC, NatWest, Barclays and Lloyds seek punishing rates of interest.

The small business lender said more than 10,000 businesses requested loans poured into its London office totalling £1,015,843,585 under the government’s Coronavirus Business Interruption Loan Scheme (CBILS), aimed at keeping small firms afloat.

Last month Chancellor Rishi Sunak announced an ‘unprecedented’ £300bn worth of state-backed loans with ‘attractive’ rates to for firms.

This small business loans scheme is designed to offer companies up to £5m interest free for the first year, with the government pledging to underwrite 80% of the risk to get banks on board. But entrepreneurs say many of the Treasury’s ‘approved’ lenders have been lending at interest rates between seven and 30% – well above the base rate of 0.1%.

 

Small firms say they find getting loans from big banks a ‘nightmare’

Britain’s 5.9 million small firms employ 16.6 million staff and turn over £2.2trn a year, according to the Federation of Small Business.

However, last week Sunak scrapped the requirement for small businesses to show that they have no other means of funding before accessing the Coronavirus Business Interruption Loan Scheme (CBILS), hopefully allowing more firms access to finance.

Federation of Small Businesses (FSB) National Chairman Mike Cherry said: “We welcome the Chancellor’s personal intervention to ensure that banks deliver the government-backed emergency loans which are urgently needed by many small businesses. They were promised interest-free, fee-free, government-backed support from banks but, until now, the process for securing it has proved nightmarish for many.”

Funding Options chief marketing officer David Keene added: “The banking system needs to pull together to help our businesses survive. At present, the government’s Coronavirus Business Interruption Loan Scheme is only helping businesses that are low-risk. However, there are a number of businesses out there that normally would be able to access finance, but currently can’t under more stringent lending criteria. The key to untying the Gordian knot is to bring more  alternative finance providers, B2B (business-to-business] marketplaces and other fintech organisations into the solution to complement the big high street banks.”

One in three UK businesses it is feared will be to be forced out of business if the lockdown is extended for another month or two, unable to access loans through the normal routes.

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Galina Mikova

Galina is a Hubspot-certified Technical Writer with over 10 years of experience in working with Fortune 500, private investment, banking, FOREX and niche tech companies as well as crypto and blockchain startups. She has a solid background in FinTech and blockchain technology.