Early concerns about the government’s Bounce Back Loan Scheme (BBLS) raised by executives of independent leasing companies and asset finance brokers were shared by the scheme administrators at the time, official government correspondence recently made public has revealed.
In a statement released on 30 September, the British Business Bank (BBB) revealed that Keith Morgan, the former chief executive officer of the BBB, issued a ‘reservation notice’ to Alok Sharma MP, Secretary of State, Department for Business, Energy & Industrial Strategy (BEIS), telling him just days before the launch of the scheme (on 4 May) of the BBB board’s reservations about the scheme.
Morgan’s letter, dated 2 May, raised objections by the BBB board about the scheme on the grounds of propriety, value for money and feasibility.
Some of these views were shared by leasing and asset finance professionals in the wake of the unveiling of BBLS and were shared with Leasing Life.
But, the objections raised by Keith Morgan and his board will offer little comfort now to asset finance brokers, and commercial brokers more generally, who feel the design of the BBLS unfairly (and unnecessarily) excluded them from playing a role in SME financing and Covid-19’s recovery.
By pricing the scheme at below commercial rates, brokers were denied any commission-earning potential, an arrangement that benefited the high street banks at brokers’ expense and harmed commercial competitiveness, leasing professionals told Leasing Life at the time.
Morgan’s letter said: “With an interest rate for BBLS being set at a uniform 2.5% across the market, it is now very likely that many smaller providers will not be able to compete with BBLS in the sub £50,000 lending market, leaving the large banks as the main providers.
“This is a competitive issue now as it reinforces their dominance of the market. Over the medium to longer term, if alternative finance providers fail it may also bring into question the potential diversity of the SME finance market and its ability to support economic recovery.”
The Secretary of State issued a ‘ministerial direction’ to overrule the objections raised in the BBB’s ‘reservation notice’
The letter also raised early concerns about fraud and the BBLS.