SMEs: LENDING
From alternative to mainstream The urgent need to pump cash into small businesses over the past year has given lendtechs driven by open banking a chance to shine… but now they need government to fully embrace their potential, say Funding Options’ CEO Simon Cureton and Nucleus Commercial Finance Founder Chirag Shah Turbo-charged change since March 2020, has been a hallmark of the pandemic experience. The switch from bricks and mortar retail to digital, the growth of homeworking, Zoom calls for schools and GP appointments… the list goes on. And to that we can add another – ‘alternative’ lenders have become defiantly ‘mainstream’, according to Chirag Shah. The founder and chief executive of Nucleus Commercial Finance has overseen the lending of around £180million to SMEs via the UK government-backed Coronavirus Business Interruption Loan Scheme (CBILS) and believes the sector holds itself back by clinging to a now-outdated description. “We are mainstream. CBILS, if anything, has clearly proven it,” he says. “Businesses shouldn’t be thinking of us as option two, or option three, having gone to the banks first. That mindset has to change, starting with us, the lenders. Providers are doing themselves an injustice by classifying themselves as alternative.” The CBILS and subsequent Bounce Back Loan Scheme (BBLS) – the former 80-per-cent and the latter 100-per-cent guaranteed, but not capitalised, by the government – brought the fintech sector both
opportunity and also problems. A huge stress point early in the pandemic was a failure by mainstream banks administering CBILS to process applications quickly enough for desperate SMEs. When fintech lenders entered the fray that changed, though the schemes’ distortion of the lending market was unhelpful and, in some cases, disastrous for those lenders that could not take
CBILS was transformational for us... 98 per cent of our applications have been via open banking Chirag Shah, Nucleus Commercial Finance
part and could not compete. There was also the issue of liquidity – or lack of it – in the wholesale lending market, which put smaller and non-institutional lenders at a disadvantage. Shah says that, for 18 months before the pandemic, the industry had been working to convince
businesses that technology-driven lenders using open banking was the way forward. But scepticism remained. “CBILS was transformational for us,” he says. “We have processed more than 10,000 CBILS applications, and 98 per cent of our applications have been via open banking. It’s not that open banking changed. What changed was that businesses were willing to try it, to get quicker decisions, and we were able to provide them with a seamless journey – decisioning 86 per cent of the deals the same day. It was the first time many businesses had been exposed to open banking and they realised it was something they could buy into.” Simon Cureton is chief executive of lending platform Funding Options, which was among those chosen by the government-owned British Business Bank as a designated platform to screen businesses applying for CBILS and present them to a panel of 40 UK lenders. He agrees that the scheme ultimately proved the advantages of open banking. But the gain wasn’t without pain. Funding Options draws funding from around 120 lenders in total, to service SMEs in both the UK and the Netherlands.
Open banking for business: COVID helped convince SMEs to buy into it
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