With pressure on the government to increase the CBILS guarantee to 100%, one CBILS accredited lender believes this is NOT the solution and there are much better ways to reduce complexity, improve access and increase the speed with which businesses can access the funding they so desperately need.
AskIf CEO, Sam Bamert sets out why she believes a 100% guarantee would be damaging to UK SMEs, damaging to the taxpayer, and damaging to our left-behind communities across the UK over the long term.
Bamert’s letter suggests a 100% government-guaranteed loan wouldn’t fix the issues of complexity or speed of availability. With a finance sector not yet delivering CBILS loans at scale, changing the guarantee is not the solution. If anything, she claims a 100% guarantee would make things worse.
Whilst acknowledging the fact that Banks play a critical part in the solution, Bamert believes we need a better tool than the ‘banks need to fund all SMEs’ solution, because banks are ill-equipped to deliver loans to the smaller businesses that need it. Their problem isn’t cost of capital (which a 100% guarantee does bring down), it’s the sheer administration that they can’t cope with.
Bamert states “since the financial crisis, mainstream banks have been woefully poor at serving many smaller and more idiosyncratic SMEs. Anything that doesn’t ‘tick all the boxes’ is routinely declined”.
Since the CBIL Scheme launched, non-bank lenders have seen unprecedented levels of demand. In an open letter to the Chancellor, Bamert suggests that we must ensure that the solution for SMEs involves bank AND non-bank lenders delivering CBILS to ensure comprehensive coverage for SMEs.
She recognises it is crucial that we get funding to small businesses across the UK, to enable them to emerge from the crisis strong enough to underpin the health of our communities and the recovery of our local economies.
She urges the government to “use this crisis to deliver a silver lining: a finance sector that is more inclusive now than it was before. That delivers support and funding where it’s needed. That empowers left behind communities as well as affluent ones”.
Community Lenders (including CDFIs) and other inclusive fintech and alternative lenders need to be part of the solution and stand ready to disburse funds to the businesses most in need of financial support.