UK digital bank Tide has paused lending through the government’s Bounce Back Loan Scheme (BBLS) after funding fell through.
In an open letter to customers, chief executive officer Oliver Prill explained that financial institutions approached to provide funding for Tide to lend through the scheme were unable to do so because it did not meet their requirements.
Prill wrote: “[T]he design of the government’s Bounce Back Loan Scheme doesn’t meet the requirements of our prospective funding partners to be able to provide the funding for us to lend to you.”
BBLS, launched to combat the economic downturn brought about by the coronavirus (Covid-19) pandemic, allows businesses to seek government-backed loans of up to £50,000.
Through the scheme, a lender can provide a six-year term loan from £2,000 up to 25% of a business’s turnover. Loans are fully guaranteed by the UK government and come with an initial 12-month interest and repayment holiday.
According to Prill, BBLS is “very easy” to access for banks with large pools of funding, “but not for fintech companies like Tide”.
Tide wants the UK government to provide the necessary funding for the scheme directly to lenders, rather than lenders sourcing capital from investors or other financial institutions.
Prill wrote: “Unfortunately, we can’t change the Scheme by ourselves, but you have our commitment that we stand ready to immediately lend at scale through the Bounce Back Loan Scheme if and when the necessary changes have been made by the government.”
In the meantime, Prill has encouraged businesses to seek loans from alternative lenders.