Fintech lenders bounced out of crisis loans


#1

Here is the full article posted today in the times for those that don’t have an active subscription to view in full. Thanks to Andyp1966 for unearthing this article.

Non-bank lenders have been told that they will not be given access to cheap finance from the Bank of England in order to deliver emergency government loans.

In a blow to companies that have struggled to get state-backed finance to help them survive the Covid-19 pandemic via mainstream banks, it is understood that the Treasury has informed the fintech industry that it will not be given low-cost funding from the central bank.

Non-bank lenders have been accredited to provide the government’s bounce-back loan scheme, which provides a state guarantee in order to encourage the provision of credit to small and medium-sized companies.

However, some fintechs say that they have struggled to secure the funds they need to provide the loans.

Last week almost 70,000 small businesses hoping to secure a bounce-back loan had their hopes dashed after Tide, which provides financial services, said that it could not secure the funds. The bounce-back scheme, which has underwritten £30.9 billion of credit, provides lenders with a 100 per cent guarantee on loans to small companies, with the interest rate fixed at 2.5 per cent.

Tide said that it had frozen lending because third-party funders would not support the scheme, partly due to concerns that the low interest rate would make it impossible to make a return.

Innovate Finance, the trade body for financial technology companies, is among those that lobbied the government to back a structure that would provide cheap wholesale finance.

Last month the government consulted on a model under which commercial banks would pass on cheap finance from the Bank of England to non-bank lenders. The Times understands that the government has rejected the idea, concluding that the low interest rate would still make it too difficult to work on commercial terms.

However, at the request of lenders the British Business Bank will be allowed to assign the taxpayer guarantee to third parties in order to encourage them to provide finance to non-bank lenders. This was in response to concerns that another obstacle for prospective funders was the fear that if a non-bank lender they had supported went bust, they would not be able to access the guarantee.

Charlotte Crosswell, chief executive of Innovate Finance, said: “More non-bank lenders are now accredited and delivering Covid-19 emergency funding. However, once accredited, [lenders] then have to secure wholesale funding, and this can result in challenges for the sector. Other countries have taken a different approach and granted access to central bank funds to expedite loans through fintech. As lockdown eases we urge policy makers to recognise the pivotal role [fintech lenders] play in providing the country’s small businesses with the vital financial lifeline they need to get back on their feet.”


#2

Thank you for sharing this @Pelican!


#3

So what are we supposed to do now Obi?

I ask again what advice does Tide have for us?


#4

Hi there @Andyp1966

While we are having conversations with the Treasury and Bank of England to try to persuade them to give direct access to funding for the BBLS, what you can do as our members to support us in this endeavor is to contact your local MPs.

We sincerely hope that with enough advocacy for it, the Government will be able to amend the scheme to allow fintechs like us to continue lending.

Regards,
Obi


#5

So let’s play devil’s advocate.

The article clearly states that the government has made a decision on the matter.

Even if we lobby, what happens if they don’t change stance?

What advice does Tide give us if that’s the outcome?

Surely Tide has some advice? Or are we to understand that all Tide’s eggs are in one basket?


#6

Really can’t see Tide this persuading the Government to change the lending policy to Tide!!
Bottom line is Tide has made a mother of all mess ups !!
You cannot blame the government because your backers have pulled out!!!


#7

So let’s play devil’s advocate.

The article clearly states that the government has made a decision on the matter.

Even if we lobby, what happens if they don’t change stance?

What advice does Tide give us if that’s the outcome?

Surely Tide has some advice? Or are we to understand that all Tide’s eggs are in one basket?


#8

If the Gov Guarantee can be “assigned” then surely that removes ALL risk from the institutin lending to Tide? In an enviroment of (negative) interest rates surely someone would lend to Tide, on a fully Gov guaranteed basis, and earn 2.5%? Maybe not institutions but maybe indiviuals with money in zero yielding high street banks


#9

“” However, at the request of lenders the British Business Bank will be allowed to assign the taxpayer guarantee to third parties in order to encourage them to provide finance to non-bank lenders. This was in response to concerns that another obstacle for prospective funders was the fear that if a non-bank lender they had supported went bust, they would not be able to access the guarantee.””

So… government have rejected funds direct from boe but will put the guarantee in place to tides lender in case Tide was put out of business ??

Am I correct in this thinking ?


#10

So.

Depends on the reason the lender pulled out was, if it was because of uncertainty then it’s a positive development. If it’s because 2.5% isn’t worth scratching their arse for then it isn’t.

You would think this is now more appealing to a Main Street bank to lend to tide ?

Tide do all admin and carry the cost of the process but the Main Street bank carries the certainty and bbb guarantee…

Much like others suggested Tide literally just act as the mediator and ensure, they & us, stay in business.


#11

Obi can we please get answers.


#12

Agree, but maybe High Street banks WANT Tide (and other fintecs) to fail? Then people back to square one getting ripped off by High Street Banks. Treasury really blew it here as they had a perfect oppotunity to support the Fintec secotr - where UK can lead the world.


#13

@Jtreacher quite possibly, damn short sighted angle to take tho

If tide fail, we fail, if we fail, their customers have less business, our businesses use their businesses & that will eventually cause them economic harm…

Maybe Oliver will realise he will lose so many customers That the profit is no longer as important as helping us help Tide stay in business…

If tide were trying to negotiate a loan from a Main Street at 1% / 1.5% split and because they can get 2.5% direct they thought why bother ?

With the new situ with the bbb, the Treasury is pushing one or 2 to step in to fill the gap ? & perhaps now tide might just have to sacrifice their profit out of the 2.5% ? But at least they don’t lose all their customers. In the older times article it did say the Main st banks turned it down due to margins and worrying it might not be worth their while.

Tide take 0.5% & main st 2% perhaps it looks more attractive ?

Tbh as with all of the communication and situation so far you need to be Delphi to understand the cryptic messages we get across the board.

Tide need to be honest & clear with us with what is going on… is everyone (Anyone) tied to a list & what their next plans are.

We can’t be expected to just continue to hold blind faith when having done so for months has caused nothing but disappointment & turbulence.


#14

I had a few exchanges with a Tide shareholder (institution) as I wanted to get the “real story”. What I was told, and believe, was that Tide was out seeking money - anywhere and everywhere. And that Tide were prepared to take no margin, but pass on the whole 2.5% to whoever lent them money. And it appears that they could get no takers. I do not think Tide can afford to “top up” and pay others to lend to them and then subsidise loans to us customers.

I agree communicaton could have and should have been much more open and honest. As a CEO myself, I have experienced executives not dislosing issues and problems and they think they can “pull a rabbit out of a hat”. Unitl they cannot - and the situation much worse than if they had alerted everhone to the issue first thing, Tide shoudl have said “we are accredited, have limited funds, suggest you look elsewhere etc” And NOT had their ridiculous list etc. There is a big problem here, I believe, at seniour management and board level.

Treasury could and should MANDATE other lenders either take on Tide clients or provide funding to Tide to onlend. Treasury has that “stick” to use. If it chooses. And let us not forget, the goal is to save SME business and get money out to all those eligible as quickly as possible. Not “play games” amongst banks and fintecs.


#15

This is how this news was reported on Altfi (Quoting the times article)

Incumbent banks block alternative lenders’ access to BoE’s ‘Term Funding Scheme’

Following lobbying from industry figures, such as Innovate Finance, the government was consulting on whether or not it would allow incumbent banks to pass on cheap finance to accredited non-bank lenders, a move which it has now rejected.

So like someone noted before (I think it was Cam), High street banks probably don’t mind Fintechs like Tide failing as they are not in their club


#16

@Jtreacher so based on what you have found out & “if” tide even ever had a potential lender, the news that the bbb would extend the guarantee to the lender of tide directly must be a positive development.

Surely this is even better for a high street back than us going directly to them, they are succeed on the funds and have very minimal admin to complete… (if tide went under, would our loans through tide be written down automatically with the main st bank just receiving funds from the bbb ?) :eyes:

Sadly I don’t share the same optimism in that the objective is to save SME’s, in my opinion it’s to save enough sme’s to ensure they don’t piss off a majority, that’s all.

As we can see and can be seen in how they are treating 3m people who have received nothing, how can it be ok for the government to allow some sme’s and firms to operate and still claim government funds & yet you completely ignore 3m ? And firms get an extra £1000 for bringing back employees? And you ignore 3m people who you forced to close and haven’t made money since February/march?

It’s an utter incompetent disgrace, nothing more than lazy contempt, it would not be that hard (harder, not fooking hard) to put out equal funds to everyone & really if the main objective was to save us and sme’s it wouldn’t be touted as acceptable every day in the house by rishi.

For similar reasons they rejected tides cry for help, they have done it on the continent, and they could do it. But again it’s further left for the banks to sort out.

@Pelican which as you’ve just highlighted again, if their intention is and they are happy to see the fintechs like tide go under, why would they bother?. If government main objective was to help us, they wouldn’t leave it to the Banks to decide the fate of the competition - almost laughable, especially when you consider it’s a fooking bank lol.

So now I guess the only real question that remains, if bbb are giving the guarantee to a bank, will a bank step in, or do we really live in such a fu*ked up society (country) that during a pandemic, when businesses are going under and people are on the verge of losing everything, Struggling to feed their kids, a bank will try to squeeze a few extra pounds out of people ?

Even more disgraceful when you think we bailed them all out in 2008 to the tune of £850b (tax payer funded of course)

Place your bets !!


#17

Here’s an interesting graph, for contrast, Lehman brothers was running at a 30:1 leverage when they went bust.

It won’t be long till the banks are getting another bail out & people might want to be careful who they bank with:


#18

I think the problem is in the phrase “the government was consulting”. In my view, “consulting” is never a good thing - unless a fig leaf coer for what you have decided to do anyway. If the Treasury WANTED banks to lend to Tide, the Treasury could make them do it. If they do NOT really want banks to lend to Tide, yoiu “consult” and then say, “not my deicsion, but afer consulting (with the very banks who compete with fintecs) it was decided not to proceed”. Perfect buck passing - except no “bucks” in this case!


#19

Real issue is what to do NOW? (i) Close Tide accounts and attempt to open accts at other banks (ii) keep Tide accounts but ask to leave “waiting list” (iii) stay with Tide and no waiting list, and apply to open accts and BBL at other banks - assuming issue re being on Tide “list” akin to making an application etc sorted (iv) call in the receivers (v) other?

It would be great to get some PROPER LEGAL ADVICE on here as to our rights (if we have any) and, at the very least, preserve whatever claim for damages we may have against someone/anyone in future. Any lawyers around?


#20

I’m going for option 3 I can last a short while longer, would also personally like to try and help tide help us, if we all fuck of and start botching on them it’ll never happen and they have imo only ever had good intentions

will wait correspondence from tide… I have other account applications in process which is will then apply for a bbb should they be set up & tide don’t pull a rabbit out of a hat.

Preserve claims for damages from who?

Tide?

Considering they’ve been caught between a rock and hard place, is it / would it really be worth it?

If tide don’t sort this mate, the tide will go out and probably won’t come back in again, would it really be worth trying to kick them when down?