Once the sweetheart of governments, the alternative finance and fintech community appear to have been dropped in the moment of crisis.
After 12 years of rallying behind the alternative finance market with government support - from the CMA to the £750m BCR grants - much is at stake for given the state of UK lending.
The providers of the CBILS were onboarded through the legacy EFG programme, which comprised almost entirely of banks and local government funds but no fintechs.
Alternative, diverse credit models will always be needed
Since banks set about the irreversible process of narrowing their product sets and closing their bank branches, alternative finance has been there to fill the gaps. Mainly in the smaller end of the unsecured market - under £500,000 - where banks were unable to make the unit economics work.
The fact is, with or without CBILS, this challenge still exists. We need fast, efficient access to capital, whether it is guaranteed or subsidised by the government or a commercial product.
So surely Fintech's should be part of the distribution method for CBILS too?
Distribution of funds via Fintechs
The next generation of distribution which includes marketplace platforms such as Capitalise.com and lenders such as iwoca, MarketFinance, Funding Circle and ESME are designed to get the funds to a borrower at a lower cost, faster and at high conversion.
All this results in less time wasted by businesses looking for finance, better outcomes and better customer experience.
It’s time for CBILS to use the market that the government has been investing in.
Three ways the government can help
1. Admit alternative finance lenders into the CBILS programme
Alternative finance lenders have modern technology and flexible processes to adapt faster to the programme and start to distribute funds.
2. Use marketplaces such as Capitalise.com to match borrowers to products
Marketplaces play an essential role to match the borrower to lenders and this is no different in the case of CBILS with some 40+ providers out there.
3. Design a commercial model to allow for the origination of CBILS loans
Helping small businesses is expensive at the best of times and with the value of each CBILS loan lower for lenders their orgination must work for all. Setting a price on this will allow more market participants to play a roll.
Accountants at the frontline
This crisis has shown which industries we truly rely on. Accountants have been at the frontline of helping small businesses, and while this has always been the case, it’s now clear that business owners value their advice highly.
Accountants help translate the government's guidance, and now, this stretches further in assisting small businesses to navigate the CBILS programme.
Our adviser-led funding platform has seen record volumes of accountants helping their clients through find solutions to their challenges.
Together, we can ride out the storm. If you have any other useful information you feel needs to be shared surrounding the Covid-19 crisis, then please reach out to us.