The UK's big banks are blocking alternative lenders' access to the Bank of England's Term Funding Scheme, risking putting some out of business, warns Funding Options CEO Simon Cureton.
The BofE introduced the scheme in response to the Covid-19 crisis, allowing eligible lenders to access four-year funding at rates very close to Bank Rate in order to get credit to people and businesses.
Cureton argues that, well intentioned as the scheme was, by ring-fencing the cheap capital it has hurt challenger banks and alternative lenders while the traditional banks are unwilling to help out their new rivals without a return.
Earlier this month, business banking startup Tide said it would freeze lending under the Bounce Back Loan scheme after failing to win funding to finance the financial assistance packages.
Things could get worse, predicts Cureton: "Without greater liquidity we may see some alt-lenders cease trading and a flourishing new fintech sector regress years in the space of a few months."
Ultimately, he says, small businesses already facing an unprecedented crisis will be the biggest losers.
"They deserve choice, fast decisions, and innovation that identifies and responds to nuanced situations."