Credit funds said to see opportunity in UK SME loan scheme

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By Owen Sanderson, Tom Brown
21 May 2020

Credit hedge funds are looking to finance books of SME loans originated under the UK government’s Coronavirus Business Interruption Loan Scheme (CBILS), subscribing for the equity in private securitization vehicles backed by the loans. The government guarantees are likely to improve the financing terms on offer, boosting returns for funds that can access these assets — but there are still questions over the details of the scheme.

CBILS guarantees 80% of eligible loans, with lenders taking the risk for the remaining 20%.

Many accredited lenders have banking licences and their own balance sheets, but non-banks are also approved for the scheme, with the likes of Funding Circle, Hitachi Capital and White Oak UK involved. ...

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