Funding Circle has been given the go-ahead by the British Business Bank to distribute business loans to small- to medium-sized business (SMB) owners hurting because of the coronavirus pandemic, according to a company blog post.
Funding Circle said it will only be focused on Coronavirus Business Interruption Loan Scheme (CBILS) loans for now, and in doing so, will be unable to service retail lenders as it usually does.
The loans will come through the U.K. government’s CBILS program, intended to bolster SMBs that have had to close their doors and have seen revenue shortfalls because of the coronavirus.
According to Funding Circle, that means lending for retail investors will be turned off. Loans already in place will continue to be paid by the recipients in both principal and interest repayments, and the lenders can take that money out of their accounts at any time, according to the blog post.
But only focusing on CBILS loans will give more protection to everyone, according to Funding Circle, because the SMBs receiving the loans will be able to continue trading through the economic strife caused by the pandemic, thus everyone’s loans will be protected.
The coronavirus has hit the U.K. economy hard, and the government has responded by issuing financial aid. But many businesses say the money isn’t coming fast enough to save them. As of last week, there was a backlog of loans under 25,000 pounds ($31,200). Because of this, banks are requesting that the government shift the loans into being 100 percent state-guaranteed, rather than expecting the banks to shoulder the risk.
In the banks’ estimation, being government-backed would help to get rid of the backlog and get people the money they need during the pandemic. U.K. Finance CEO Stephen Jones said the process of checking whether companies can repay the loans is more time-consuming than in countries like Germany, where the loans are all state-backed.