Small business owners have been venting their frustrations regarding an alleged lack of help from lenders. Those who are pursuing the money that they are owed are seeing blame shifted onto them by disgruntled borrowers who are appealing for more time to make repayments.
Lenders such as Funding Circle are keen to offer their customers reasonable repayment terms to keep businesses afloat, with one borrower recounting how he was granted a 3-month break on his loan due to Coronavirus.
Despite offering terms to the vast majority of customers, Funding Circle and many other lenders have come in for criticism from some for not offering better terms and not responding promptly enough to requests. A spokesperson for Funding Circle rebutted these claims, stating that they have “been flooded with calls about Covid-19” and as a result, may take slightly longer to get back to all tickets.
With 15-month grace periods to clear arrears not being unheard of, lenders are clearly trying to tackle this issue head on and give businesses as much room to breathe as possible. It is a balancing act between relentlessly pursuing debts and keeping debtors afloat that lenders must be wary of. As some businesses have seen their incomes completely slashed to nigh-on zero, it is a wise move from lenders to grant these borrowers the time to repair the damage and pick regular payments up in the near future.
Although Funding Circle have been addressing a lot of consumer concerns, some still disagree, with one borrower declaring them to “be behind all other financial institutions in helping people and relaying the correct information.”
This shifting of blame towards lenders is being echoed by other small business owners who believe lenders are being “unresponsive and inconsiderate” whilst escalating claims without properly consulting borrowers.
The FCA has also stepped in to plead with lenders. They have been urged to be considerate in their approach, helping as much as possible where they can. With 1/5 of all UK mortgages now being granted a payment holiday, it would seem that lenders may have to reconsider their terms going forward. Funding Circle have stated that as they are not a traditional lender, loan contract changes need to be actioned alongside borrowers.
Having invested over £1.5bn since it was set up in 2010, Funding Circle has become an integral funding source for businesses which is why borrowers are still keen to develop a workaround. Funding Circle have partnered up with Barclays and HSBC – two lenders who are classed as ‘mainstream’, to make use of the coronavirus business interruption loan scheme (cbils).
It is also worth noting that from an investor standpoint, peer-to-peer lending always comes with associated risk and is something that lenders should always be wary of when entering into any agreements.
It can take up to 5 years to see a complete withdrawal of funds and can take even longer if your investments have accrued bad debt.
The introduction of Covid-specific payment plans has helped to ease these worries somewhat between all parties, with a Funding Circle spokesperson calling it a “win, win, win” for investors, lenders and borrowers alike.
It has been reported in the Telegraph that the Chancellor, Rishi Sunak, is considering plans to extend mortgage holidays for those affected by Covid-19. He is working alongside the Financial Conduct Authority (FCA) and banking sector to provide further relief to homeowners. It is reported that this would not be a “blanket” extension and that criteria could be tightened.
Under the current scheme, borrowers may apply to defer payments for up to three months without impacting their credit files. However, customers are required to repay the money once the scheme ends. Thus far, lenders have provided relief to some £1.7 million people struggling to repay their mortgage payments.
And a final word from one of our experts: “Given the extension to the ‘furlough’ period under the job retention scheme announced earlier this month, is seems an inevitability that people struggling to pay their mortgages will be offered further help. There is no news yet on whether people finding it hard to repay unsecured credit such as personal loans and credit cards because of Covid-19 will be offered extensions.”