The All-Party Parliamentary Group on Fair Business Banking (APPG), said that although one million loans have been provided through the scheme, business owners who have been encouraged to move to other fintech firms and non-bank lenders can’t access the loans.
According to the APPG, these finance providers do not have access to the Term Funding Scheme (TFS), which the Bank of England uses to provide cheap money to lend to mainstream lenders. Lenders that can access the scheme are largely closed to new customers, the APPG said.
In a statement, the APPG said: “In a recent survey carried out by the APPG, all banks who offer Bounce Back Loans were either closed to new customers or had technical restrictions that made it difficult or impossible to access loans or long waiting lists to do so.”
The APPG is calling on the Treasury, the FCA, mainstream banks and the Bank of England to eliminate the barriers that block non-bank lenders from having access to the TFS.
The APPG said: “The TFS is an expansionary monetary policy that provides mainstream banks with wholesale interest rates, which helps transmit the reduced interest rate into the real economy and thus supports growth.
“Alternatively, the mainstream banks could provide non-bank lenders with funds from the TFS to ‘on-lend’ to their customers or mainstream banks should open access to loans applications from new customers.”
Kevin Hollinrake, MP, who is the chairman of the APPG, said “The Government and mainstream banks have done a brilliant job of delivering one million Bounce Back Loans in record time, but it cannot be right that tens, maybe even hundreds of thousands of businesses are unable to access finance at this crucial time.
“Quite rightly, we have encouraged the fintech sector and told SMEs (small and medium-sized enterprises) to shop around for their finance needs, but some of those that have are now left out in the cold.
“We need to address this situation, or we will see many thousands of businesses going to the wall unnecessarily.”
A HM Treasury spokesman said: “Our loan schemes are helping hundreds of thousands of firms get finance quickly at low, affordable rates, with over a million Bounce Back Loans issued. We recognise the vital role that alternative lenders and challenger banks play providing credit to SMEs.”
The spokesman added: “The Bank of England is independent and sets its own terms for funding schemes, which are made clear to all in the financial services sector. Non-bank lenders like Funding Circle are accredited to the scheme, and we will continue to work to support others to participate.”
The Term Funding Scheme with additional incentives for SMEs (TFSME) is a monetary policy tool introduced by the independent MPC in March to respond to the economic shock from Covid-19.
It is designed to support monetary policy transmission and lending to the real economy, especially SMEs.
Eligible institutions for the TFSME, as designated by the Bank of England, are banks and building societies that are participants in the Bank of England’s Sterling Monetary Framework and are signed up to access the Discount Window Facility.
As of July,12 more than one million BBLS facilities had been approved, providing £31.7bn to small businesses.
A further £11.85bn has been approved under the Coronavirus Business Interruption Loan Scheme (CBILS) and £2.73bn under the Coronavirus Large Business Interruption Loan Scheme (CLBILS).
While most accredited lenders are currently only offering Bounce Back Loans to existing customers, some , such as HSBC, are also serving new customers.
The Treasury spokesman said: "We are working closely with all lenders and have made changes to help non-bank lenders, including allowing the transfer and assignment of the Government guarantee for both BBLS and CBILS loans, in order to support their ability to access funding."
A spokesman said the Bank of England was unable to comment on the APPG's statement.
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