Investors Chase Profits as U.K. Business Loan Program Concludes

(Bloomberg) -- With just three weeks to go before Britain’s state-backed business loan program stops accepting applications, MarketFinance Ltd., a London-based fintech lender, has secured 50 million pounds ($66 million) from Israel’s Viola Credit to fund new loans.

Viola is betting that demand for credit among small and mid-sized enterprises will soar as the government-backed financing winds down. MarketFinance has originated 43 million pounds in loans under the Coronavirus Business Interruption Loan Scheme (CBILS) at an average annual interest rate off 4.25%, compared with the central bank benchmark of 0.1%.

“We are predicting that there will be quite a big rush to obtain loans toward the deadline,” said Anil Stocker, the chief executive officer of MarketFinance, one of more than 100 lenders accredited by the British Business Bank to make loans backed by an 80% government guarantee.

Stocker said a key driver will be borrowers who obtained emergency financing through the government’s Bounce Back Loan program. Unlike CBILS, which capped loans at 5 million pounds, the Bounce Back ceiling was 50,000 pounds. Backed by 100% government guarantees, lenders have approved 35.5 billion pounds in Bounce Back loans for 1.2 million enterprises, according to data from the Treasury.

Now many of those businesses that still need cash may try to refinance Bounce Back loans into CBILS ones, Stocker said. While the Treasury has stated that there are no plans to extend the CBILS’s Sept. 30 deadline, lenders can process applications received before Sept. 30 well into the fourth quarter. The extraordinary loan activity triggered by the pandemic is poised to continue for some time to come.

©2020 Bloomberg L.P.