Businesses that took out Bounce Back Loans (BBLs) from non-bank lenders may struggle to access further funds as alternative lenders scramble to secure financing.
The Treasury was forced to introduce top-ups and extend the application deadline for the 100 per cent state-backed loans to January after England was placed into another lockdown last week.
From tomorrow, SME owners who borrowed less than the £50,000 or 25 per cent of turnover limit for BBLs will be eligible to apply for top-up loans to help see them through another lockdown.
However non-bank lender Tide – which does not hold deposits, and does not have access to cheap funding provided to licensed banks – is struggling to secure the funding needed to provide BBLs top-ups to its customers.
Bounce Back Loans have also come under scrutiny following reports by City A.M. that small businesses were being “locked out” of applying for the loans despite being eligible for funding.
Kevin Hollinrake, chair of the all-party parliamentary group (APPG) for fair business banking, told City A.M. that top-ups risked creating a “two-tier system”, with SMEs that bank with non-traditional lenders “particularly disadvantaged”.
Hollinrake added that the introduction of top-ups “doesn’t solve the problem if you weren’t able to get a loan in the first place”. “For many people that is existential, it is the difference between succeeding and failing,” he said.
Tide lent over £50m to just under 2,000 small businesses under the BBL scheme, but was forced to close applications in July after running out of funds.
Unless Tide can secure funding from private backers or the cheap loans the Bank of England provides banks, it will be unable to re-open BBL applications or provide top-ups, City A.M. understands.
This would leave Tide customers who attempt to secure further BBL funds with few options, as all but one of the 28 lenders accredited under the scheme is now closed applications from new customers.
A spokesperson for Tide said it was aware of the announcement that BBL top-ups were set to be introduced, but added: “Tide has not yet received any official communication and so cannot comment further at this point.”
Non-bank lenders Funding Circle and Capital on Tap and Funding Circle are also accredited BBLs lenders. Funding Circle said BBLs customers would be able to register their interest for top-ups from tomorrow, while Capital on Tap did not respond to a request for comment.
“Time and again we’ve warned government about the ability of businesses to access these loans, and there are real concerns, that businesses – and lenders – are being shut out,” said shadow business minister Lucy Powell.
“There should be a level playing field for all businesses and lenders, and the government must act to ensure finance is available to those who need it,” Powell told City A.M.
Hollinrake said allowing non-bank lenders to access the Bank of England’s term funding scheme aimed at small business lending would ensure all eligible businesses could secure BBLs top-ups if needed. The scheme has made it easier for banks to borrow cash to fund BBLs.
The Conservative MP said banks with access to the funding scheme could lend money to non-bank lenders so they could issue BBLs to solve the issue. He also suggested that the Treasury could provide the state-owned British Business Bank, which administers the BBL scheme, with funding for the lenders.
“Through one means or another there are a number of different solutions which are not beyond the wit of man, and could be rolled out very very quickly,” Hollinrake said.
The Bank of England declined to comment on the possibility of extending access to the term funding scheme. The Treasury also declined to comment.