EXCLUSIVE UK’s Tide breaks ranks on crisis loan deferrals
- First lender to break ranks on payment extensions
- Businesses suffer from withdrawal of government support
- Tide says he can’t afford to extend loans
LONDON, June 23 (Reuters) – UK commercial lender Tide has said it will not grant deferral of payment to small businesses that took out state-backed loans during the COVID-19 pandemic, the leading lender to break ranks and refuse such support.
The government announced new “Pay As You Grow” (PAYG) measures in February, giving struggling businesses the option to delay repayment of state-guaranteed loans to 10 years instead of six, among other options.
Tide’s decision not to offer PAYG is a first indication of how lenders are making tough choices between their own business interests and those of small businesses, as unprecedented levels of support for these businesses are withdrawn.
It also highlights the risks for clients of taking loans from fintech companies. Online lending platforms such as Tide have gained prominence in Britain in recent years, using digital apps that often provide smoother service than traditional banks to reach large customers. But some app providers don’t have banking licenses and in Britain they haven’t had access to cheap central bank funding during the pandemic.
In a statement posted on its website, Tide said it would not offer PAYG because it did not have the backing of the government to help it extend the loans.
More than 1.5 million so-called “rebound” loans (BBLS) worth more than 46.5 billion pounds (64.9 billion dollars) have been granted, but up to 35 to 60% are expected. be lacking, according to government estimates.
Tide had already faced criticism over its handling of BBLS last year, after a funding crunch forced it to suspend lending under the program.
Official data last month showed bankruptcies in England and Wales fell to their lowest level in more than 30 years at the start of this year, but more businesses are expected to struggle as that state support to the economy is reduced. Read more
Finance Minister Rishi Sunak said the additional support from PAYG would give companies “leeway to get back on their feet,” when the program was announced in February.
Tide supplied at least £ 50million of BBLS, according to interviews with its chief executive Oliver Prill last year. More recent data was not available.
“Tide made the difficult decision not to offer PAYG as we would be unable to fund an extension for all BBLS members,” he said in the statement.
Martin McTague, vice president of the Federation of Small Businesses, said the lender’s decision was “deeply concerning.”
“The ability to extend grace periods or spread rebound payouts over longer periods will be important for the survival of many businesses,” he said.
While lenders are not obligated to provide such support, many companies had relied on him, especially as Britain recently pushed back the full reopening of its economy on June 21, he added. .
A spokesperson for Tide declined to comment, referring Reuters to the statement posted on the lender’s website.
The government-owned British Business Bank, which operates BBLS and PAYG, said: “A borrower does not have to be in financial difficulty to apply for Pay As You Grow, so they are expected to be offered if the customer requests it. “
($ 1 = 0.7169 pounds)
Reporting by Lawrence White and Iain Withers; Editing by Emelia Sithole-Matarise
Our standards: Thomson Reuters Trust Principles.