Fintech companies, challenger banks and alternative lenders may soon join big banks in distributing UK government guaranteed loans to small and medium-sized businesses affected by the novel coronavirus pandemic.

British Chancellor Rishi Sunak has launched a program to provide financial support to SMEs during the coronavirus pandemic.

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These companies can do as good a job as incumbent banks in disbursing government loans to businesses, if not better, industry insiders have said. Starling Bank Ltd., Aldermore Bank Plc and iwoca Ltd have told S&P Global Market Intelligence that they hope to be included in the program, which is administered by ta British Business Bank PLC.

Government measures to stop the spread of COVID-19, the disease caused by the coronavirus, have included the closure of bars, restaurants and non-essential stores since March 23. British Chancellor Rishi Sunak made £ 1.2 billion in government guaranteed loans offered to SMEs through the Coronavirus Business Interruption Loan Program, or CBILS, open for applications on March 23. SMEs whose activity has been interrupted can request up to £ 5million via the scheme, which is to be distributed via 40 lenders accredited by the British Business Bank.

Major banks such as Barclays PLC, HSBC Holdings PLC and Lloyds Banking Group PLC are on the list of approved lenders, along with a number of specialty and regional lenders including Skipton Business Finance Ltd. and Chamber Acorn Fund (Humber) Ltd. fintechs and the generation of challenger banks which have become major since the 2008 global financial crisis are conspicuous by their absence.

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The British Business Bank has said it is looking to integrate fintechs and alternative lenders into CBILS as soon as possible.

“Our first priority was to get the program in place. But now it’s our priority to involve new lenders,” a spokesperson said in an interview, adding that there had been “a lot of interest. “from fintechs and alternative lenders.

Starling has already received a request, a spokesperson for the bank said.

But the British Business Bank must act quickly, fintech bosses and industry experts have said.

As the month draws to a close, it is “the critical hour” for SMEs with bills to settle and staff to pay, said Raghavendra Rau, professor of finance at Judge Business School in Cambridge and expert in alternative finance, in an interview. Rau said he welcomed CBILS and was “cautiously optimistic” about the program’s ability to stabilize cash-strapped SMEs.

“I would probably agree that small lenders are better placed to provide funds to SMEs,” he said.

Liquidity required in hours, not weeks

Christoph Rieche, CEO of Iwoca, which specializes in small business loans, agrees that the need for cash for businesses is becoming more urgent.

“We remain focused on our mission to provide our clients with the financing they will need to close cash flow gaps, stay afloat and plan for the future. But they need it in hours, not weeks. We hope to be accredited so that we can work with HM Treasury and the BBB to ensure that the measures put in place are implemented in a way that will genuinely help micro-businesses and the economy at large ”, a- he said in an email.

While Sunak’s early introduction of CBILS is laudable, the government must be realistic about the limits of the big banks when it comes to securing emergency funding, Louise Beaumont, executive chairman of Signoi, a company in ‘artificial intelligence-based analysis, and chairman of industry body techUK’s smart data task force, said in an interview.

“It’s good to announce measures, but companies need to be able to access them,” she said.

Fintechs and alternative lenders will often be in a better position to provide funds to SMEs quickly than large banks, Beaumont said.

‘We are ready’

The SME lending platform Funding Options Ltd., in which Beaumont is an investor, wrote a letter to Sunak, seen by S&P Global Market Intelligence, urging it to include challenger banks, fintechs and alternative lenders in CBILS, and draw on their expertise in order to find new solutions to the financing problems of SMEs.

“We have some of the best developers in the world, all of whom are used to pivoting all the time and building products at scale. We can help create platforms that will streamline the process for businesses to access these funds. You can also use our Customer Success staff to offer business support and advice. We are on the front line when it comes to supporting businesses facing financial challenges. We know the challenges of accessing finance and are ready to offer help through our digital channels, ”the letter said.

Funding Options also urged Sunak to use Open Banking, a law that allows fintechs and other institutions to log into master bank account data, with user permission, to analyze transactions and deliver products and services.

“This will reduce the time it takes to distribute loans under CBILS, which will save businesses and jobs, help stabilize the economy and pave the way for recovery,” the letter said.

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