Consortium formed to deliver urgent liquidity to UK SMEs
A consortium of fintech companies has formed to offer the government the ability to speed up the allocation of SME loans in response to Covid-19. It is designed to focus on small businesses that need up to £150,000 loans to stay solvent and manage cash flow, and is calling for £5bn government funding to kick start distribution ahead of critical end of the month difficulties.
The consortium is spearheaded by leading fintech entrepreneur and WorldPay founder, Nick Ogden, along with ClearBank and Funding Options. It has more than 167 members in total so far, with lenders including Just Cash Flow, Credit4, Invocap, Merchant Money and Fleximize. All UK lenders are being welcomed to join.
Cash flow is critical for business survival, particularly for micro businesses which make up 96% of the UK’s business population. As of Friday, just £1.1bn of £330bn SME loans in the coronavirus business interruption scheme had been granted signalling that a crisis point will hit by payday at the end of the month.
To offer a solution and mitigate further economic damage, the consortium has been set up to open access to lending, make it easier to onboard businesses and facilitate fund delivery, so that SMEs can receive the money they need as soon as possible. ClearBank can onboard regulated businesses and facilitate fund delivery, and Funding Options can provide access to appropriate lending, with businesses being able to access the scheme via Business.co.uk. In addition to the above the scheme is open for any UK lender to join.
Nick Ogden, leader of the consortium:
“Small and micro businesses are at the heart of our economy. Cash flow is critical and in the current system, they’re not receiving funds fast enough. We need a specific distribution channel to serve thousands of small businesses and this can only be achieved through a consensus approach. Via this consortium we have built a fully regulated structure that can uniquely support the government who are trying to find a way to fix this problem. We’re ready to go.”
Charles McManus, CEO, ClearBank:
“ClearBank is uniquely positioned as a clearing bank with absolute focus on delivering innovation to the UK payments market. Our real-time, state-of-the-art payment systems will ensure that once a loan is approved it can be instantly delivered to any UK business. We sincerely believe that working cooperatively with the industry and government, we can support the lenders many UK SMEs require in their hour of need.”
Simon Cureton, CEO, Funding Options:
“Funding Options sits at the middle of UK SME lending and we saw an unprecedented demand for £1.7Bn of loans in March, many of which remain unfulfilled as a consequence of the reduction in market liquidity. Many of our lenders including Just Cash Flow, Credit4, Invocap, Merchant Money and Fleximize are ready to act now and via ClearBank® we can offer a complete service that speeds up the application and ensures rapid delivery of funds. The availability of 100% guaranteed loans from the Government removes the liquidity block that exists in the market today.”
John Davies, chairman, Association of Alternative Business Finance:
“The industry has a code of conduct which will ensure that this lending does not create a moral hazard to UK taxpayers, who are providing this much-needed liquidity to UK SMEs in their time of need. We are happy to see the industry come together in this way and we fully support this consortium.”
The Rt Hon the Lord Triesman, Salamanca Merchant Bank:
“The Government’s crucial financial support for business has to be made to work or it will fail – it is failing -with disastrous consequences for our economy. The Bank of England has to guarantee loans and banks and lenders should simply administer the process. We are convinced the process we have designed should take no more than seven days. Seven days to save the economy.”
Huw van Steenis, chair Sustainable Finance at UBS & former Senior Adviser to Mark Carney:
“Policymakers should draw inspiration from the financial response to hurricanes and other countries’ Covid-19 programmes about how to disburse grants effectively. The Swiss emergency lending scheme was started on March 24 and has now passed on funds to 106,000 small firms — 17 times the UK scheme. The loans are 100% guaranteed by the state and so the banks are not required to undertake all the time-consuming checks you would expect any lender to make. Rather, it is a one-page online form and funds are paid the following day.”
Matthew Gamser, CEO, SME Finance Forum, International Finance Corporation, part of the WorldBank:
“An exciting partnership that hopefully will turbocharge coronavirus relief efforts for the UK’s SMEs.”