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CBILS – lies, dam lies and statistics

As everyone will know we have been trying to get to the bottom of some of the issues around Coronavirus Business Interruption Loan Scheme (CBILS), to help find solutions and make #FintechsSaveUK a reality. We began investigating  on the 8th April with our webinar “Can Fintechs save the UK economy by funding small businesses?” with support from our friends at Funding Options, Funding Xchange and The Association of Alternative Business Finance (AABF)

For this article I wanted to share where we are, some comments we have received and some quotes that have been provided, with plenty more announcements expected next week (20th April).

Previously

UK Finance released figures staging that “The number of loans approved each day continues to rise, increasing from 240 on 2 April to 910 on 8th April” [1]. Reports from the AABF suggested that UK Finance had only approved 2,000 loans up until the 7th April [2] stating an approval rate of just 0.64%! ”Terrible” I hear you shout!,” however, at the time of writing this we were unable to find application data from UK Finance to support this percentage. However, figures just one day later from UK Finance on the 8th April showed  figures of 22,099 applications, with 3,309 loans approved; a much healthier rate of 14.97%

There is doubt surrounding the reliability of these figures due to the differences in how different bodies define the application figure. Back on 27th March in a letter to the Treasury, Funding Options stated that almost 5,000 SMEs had requested £400M in loans over the past 10 days [3]. In the first two weeks following the lock-down, Funding Xchange saw vulnerable businesses use the referral process to access very small amounts of funding, with 70% of businesses requesting less than £15,000. [4]

Following the announcement on the 23rd March the schemes criteria was understandably grey. To help combat this The British Business Bank (BBB) on the 2nd April changed their stance on lending limits and most importantly eliminated the need for personal guarantees (PG) [5]. They have also made the criteria  clearer for accredited lenders, by only requiring an applicant’s self-declaration to confirm if a requested loan is related to the coronavirus crisis.

In a more recent interview on the 8th April The Fintech Times interviewed Funding Options who suggested that just 1,000 businesses, out of six million British SMEs, have been granted loans, totalling £145million, as a part of the CBILS.

In contradiction, Funding Options, the UK-based business finance marketplace, says it has seen huge demands from SMEs looking to borrow since the outbreak of coronavirus and they are concerned that the wider fintech lending market don’t have access to the CBILS fund.

Funding Options Chief Marketing Officer, David Keene, told The Fintech Times: “More than 10,000 businesses have requested loans in March worth more than a billion pounds. That’s a huge number of businesses looking to get some kind of lending to tide them through the current climate.”

“All of the big banks with all of their resources have only managed to lend £145million and are lending to the businesses that don’t need lending. Meanwhile, the genuine businesses that need lending are being blocked out because they’ve been hit by Coronavirus.” [6]

What does this mean? What has accounted for the much higher number of applications fintechs have been receiving? Either, the extra applicants are frustrated at having no “official” application procedure and are unaware how to access CBILS, or they have  not been successful with their accredited lender?

Present

In statistics released by UK Finance on the 15th April [1], the banking and finance sector have lent over £1.1 billion to SMEs via CBILS, UK Finance also revealed that the total lending under the scheme has grown by £700 million in the last week, an increase of 150%.

6,020 loans have now been provided through CBILS, more than double the number that have been provided just one week ago. The number of loans approved each day continues to rise, increasing from 240 on the 2nd April to 910 on the 8th April, with a further 1,800 loans worth over £300 million recorded over the bank holiday weekend. With 6,020 loans approved from 28,460 applications, this equates to a much healthier 21.15 % success rate.

Total lending under the scheme has increased rapidly from £453 million on 6 April to £1.115 billion a week later, while the average value of a CBILS loan has grown to over £185,000.

Within this period, the BBB had also made some significant additions to the accredited lenders, in an announcement on the 11th April [7] we saw OakNorth, Starling Bank and others added to the accredited lenders list. Accredited lenders have each been allocated a £value which is the maximum amount of guarantee they can pass onto their applicants. A source close to the BBB told us that the new lenders allocation would be in the hundred of millions. OakNorth have been allocated just £50m and as you will read below this has been already apportioned to their existing customers. It is not for the BBB to get involved in this, perhaps it should be?

In comments shared with The Fintech Times on the 15th April [8], Ben Barbanel, Head of Debt Finance, OakNorth Bank, said: “Our experience working with the BBB has been very positive – they’ve been very supportive through the entire process. We’re excited to be onboarded to the scheme and look forward to supporting UK growth businesses through CBILS in the days and weeks ahead. We’ve been allocated £50m by the BBB, so will be using this to support our existing customers who’ve been patiently waiting. We’ll look to onboard new customers in the coming weeks if we get allocated more capital.”

While OakNorth will use the funding for their existing customers, Starling Bank has access to many more small businesses and a larger allocation to use. A source close to Starling told us their focus was working on getting the most simplistic application / sign up procedure to date, based around their already very customer-centric app.

In comments shared with The Fintech Times on the 15th April [8] Helen Bierton, Chief Banking Officer at Starling Bank, said: “Since we were accredited as a Coronavirus Business Interruption Loan Scheme lender we have been working closely with the British Business Bank to ensure that we are in a position to give our business customers the financial support they need. We know that for some companies, timing is everything, therefore we want to be in position to allow people to apply for this loan as soon as possible.”

On Friday 17 April [9] the BBB announced the addition of Funding Circle to the accreditation list. In a story featured on Funding Circle’s blog [10] they announce the decision to focus solely on originating loans through the CBIL scheme during this period. stating “This will allow us to help small businesses access crucial government guaranteed loans during this unprecedented time.”

The figure released by UK Finance still refers to formal applications made by businesses for CBIL Scheme lending via accredited lenders. So, is this a true reflection of all applications or are there still extra applications and other businesses being overlooked?

There has been lots of talk within the fintech community about how micro UK businesses are being overlooked. However, due to the way the banks manage relationships with micro businesses, it is difficult for them to access clear financial advice about their specific eligibility and the application process. 

Speaking again to the source close to the BBB, they do not believe that it is within their mandate to regulate this high quantity of low value loans to these overlooked businesses. Their stance is that these should be handled by the accredited lenders and feel that Natwest/RBS are actively reaching out to these businesses. The question is are these banks equipped to deliver high quantity low value loans?

Steve Jones from UK Finance himself said that UK banks are being asked to support more lenders then they have ever done before. There have also been reports about the lack of automation within the BBB to support these high quantity low value loans. Our source close to the BBB has revealed that an API system is close to completion that will allow “large lenders” the ability to bulk upload client data and lend arrangements and the paperwork at this time should not be seen as a priority. The accredited lenders have been asked to just focus on lending and the automation and audit trails will be supported. It’s likely that the “large lenders” our source is referring to, are the original high street banks and established lenders, who in their own words struggle with internal processes and operations to lend at the volume required anyway.

Many feel this is an area that the smaller lenders, lending marketplaces and finecths could help the most. We asked our source close to the BBB about the lending criteria, providing downstream liquidity and the overall structuring of these loans, it was confirmed the BBB did not see this as within their mandate, and suggesting any possibility of this being added, even in these unprecedented times, as widely unlikely.

Future

In March, we had limited information and SME’s were the primary focus, and then in early April there was an increased focus on micro businesses. Moving on, they will likely be a new focus on the more established businesses, who have been able to ride out the first few weeks, looking to seek support from their bank. Enter Coronavirus Large Business Interruption Loan Scheme (CLBILS) [11].

Reflecting on the current lending situation, I found myself comparing the figures and processes, statistics and data, to the pandemic hospital admission curve. We are in a position where the requirement for lending is high but the availability is low, and eventually we will hit a peak of maximum demand, which will then hopefully level off.

So the question is, how many accredited lenders would it take to cope with the peak and the subsequent downward curve? Our source states that the BBB are working continuously on accrediting new lenders. The once 3 person team has grown to 24, in order to cope with the volume of submissions coming through. When asked about the total number of lenders needed, it seems as with the pandemic peak point, no one knows when this will be and how many is enough.

One thing we should take away from this, is that the rate of change is something no one believed possible, our Chancellor and our supporting organisations are working at speeds previously unheard of within the government (the origin CBILS scheme was up and running within 11 days). There truly is a feeling of “whatever it takes.”

The great news for everyone is that from the 23rd April 2020, UK Finance will release CBILS data on its website every Thursday at 0930hrs, adding much needed clarity to the lending applications and amounts.

We are all in this together and everyone I’ve spoken to from all areas of the government, high street banks and fintechs just want to help. Communication and transparency is key. This prevents assumptions and the propagation of fake news and unreliable statistics.

the story continues…………..

[1] https://www.ukfinance.org.uk/press/press-releases

https://www.british-business-bank.co.uk/news/

[2] https://www.aabf.co.uk/onewebmedia/AABF%20Proposal%20for%20CBILS%20V3.pdf

[3] https://blog.fundingoptions.com/covid-19/letter-to-the-treasury

[4] All referral data based on Funding Xchange analysis.https://www.linkedin.com/posts/funding-xchange_cbils-finance-funding-activity-6654859116177088512-FMbs 

[5] https://www.british-business-bank.co.uk/coronavirus-business-interruption-loan-scheme-expanded-to-benefit-more-smaller-businesses-across-the-uk/

[6] https://thefintechtimes.com/funding-options-has-called-on-the-government/

[7]https://www.british-business-bank.co.uk/british-business-bank-announces-new-lenders-under-the-coronavirus-business-interruption-loan-scheme/

[8] https://thefintechtimes.com/british-business-bankadded-new-accredited-lenders-to-cbils-including-starling-bank-oaknorth-bank/

[9] https://www.british-business-bank.co.uk/funding-circle-accredited-under-the-coronavirus-business-interruption-loan-scheme-cbils/

[10] https://www.fundingcircle.com/blog/2020/04/important-update-on-lending-through-funding-circle/

[11] https://www.british-business-bank.co.uk/coronavirus-large-business-interruption-loan-scheme-to-open-on-monday/

Author

  • Editorial Director of the The Fintech Times

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