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Fintechs rush to fill gaps in UK SME relief measures


Britain’s fintech industry is working to fill gaps in government coronavirus business relief measures, quickly offering loans to those facing financial hardship as a result of the pandemic.

Several of the country’s largest fintech firms have been pushing for accreditation from the state-backed British Business Bank (BBB) ​​to provide loans under the Coronavirus Business Interruption Loan Scheme (CBILS ).

Initially, only 40 banks – including major high street lenders Barclays, Lloyds, HSBC and RBS – were accepted into the program. But in recent weeks, new digital lenders such as Starling, OakNorth, and Funding Circle have also been approved.

“I think the challenger banks have a real opportunity here,” Starling’s chief banking officer, Helen Bierton, told CNBC. “We’re trying to build in a way that gets help for customers as quickly as possible. We’ve been set up that way; we’re a technology-driven bank.”

Helen Bierton, Director of Banking Operations at Starling Bank.

Starling Bank

Some of the larger lenders have been criticized for being slow to process loans and for putting obstacles in the way of businesses applying for them. UK Finance Banking Trade Association last week revealed that 21% of CBILS loan applications had been approved by lenders.

“I’m not surprised that clearing banks are struggling with speed and turnaround,” Ben Barbanel, head of debt financing at OakNorth, told CNBC. “They’ve always struggled with speed and spin.”

“Having said that, I have sympathy,” he added. “This is very clearly a lending situation and the banks are always at risk here.”

A UK finance spokesperson said the banking industry “understands the critical role we need to play in helping businesses get through these tough times”.

“Frontline staff have worked tirelessly to get money to viable businesses that need it as quickly as possible,” the spokesperson added. “We expect lending to continue to grow rapidly in the coming weeks as lenders work closely with the government to provide viable businesses with the support they need.”

Ben Barbanel, Debt Financing Manager at OakNorth.

North Oak

Starling, OakNorth, and Funding Circle do not yet process CBILS loans. They need to go through a “legal and operational setup” with the BBB before they can start accepting applications, said Lisa Jacobs, managing director of Funding Circle in the UK.

Alternative lenders

Starling and OakNorth are among a multitude of online banks that emerged in the wake of the 2008 financial crisis. Others include Monzo, Revolut, and Tandem. But the crash also led to a wave of new non-bank lenders, such as Funding Circle, MarketFinance and Iwoca.

British fintech industry body Innovate Finance has lobbied the government to include non-bank lenders in CBILS. Organization CEO Charlotte Crosswell said she was “thrilled” with the recent BBB approval of Funding Circle, but “can’t wait to see more non-bank lenders become approved lenders.”

Crosswell also raised concerns that alternative lenders are being asked to grant payment holidays to individuals and businesses, which could put a strain on less well-capitalized fintechs.

Charlotte Crosswell, CEO of Innovate Finance.

Innovate in finance

“If the fintech companies themselves are to grant cashless payment holidays, we need to determine if this is a fair system,” she told CNBC.

Crosswell added that Innovate Finance is working with 38 alternative lenders, asking the government to support the fintech community and do more to let them participate in its business assistance programs. She hailed the recently announced UK support package for start-ups as a “welcome” development for fintechs.

Another program put in place by the government allows employers to put their staff on leave while the government pays 80% of their wages up to a maximum of £ 2,500.

The problem with this program is that it is “essentially a government IOU,” MarketFinance CEO Anil Stocker told CNBC. In other words, companies have to pay staff first and then get the money back from the government.

the Supported by Barclays company originally focused on invoice financing, but has expanded into new areas of business lending. He has now implemented a tool for businesses to borrow money from their HMRC payment bills for the leave scheme.

Anil Stocker, co-founder and CEO of MarketFinance.


“Right now, days are counting,” Stocker said. “Having the ability to quickly get most of this money and then get paid by the government to close that working capital gap is something we’ve heard from our customers is very helpful.”

MarketFinance itself has had to put a fifth of its staff on leave to cope with the crisis, Stocker said, while its founders suffered a 40% pay cut. Company staff also see their salaries reduced by 20% on average.

And it’s not the only fintech that has to make tough decisions. Monzo, for example, is offering voluntary time off, while its CEO Tom Blomfield waived his salary for a year.

“Fintech was born out of the last credit crunch,” Stocker said. “Now I think that should play a crucial role in this crisis.”

“The government should be looking to capitalize on our unique advantages. We were designed to do things at speed and volume.”