A new method for providing funding to small businesses has emerged. Enter Just Loans.
The big question is ‘who is funding small business lending?’ The obvious answer is ‘The Banks’. But of course the truth is, it’s the customers who have money in the banks that are funding it….all of us with credit balances, and deposit accounts.
Which is fine when the banks are really lending to all the businesses that need cash flow and loan support, but not quite so good when the banks put the shutters up and tighten their lending criteria.
That is exactly why the challenger banks and the alternative lenders have emerged over the past few years. The only problem with that though is that they have no credit balances and deposit accounts from customers to draw upon for the lending, leading them to have to develop new ways of funding themselves.
We have seen the emergence of Peer to Peer lenders, and we have seen the British Business Bank, on behalf of the Government funding some of these players.
The Just Loans Group has now gone one stage further. It has created a new route to funding, inviting investors to invest in a bond, which is secured by all the loans it backs.
The critical element of this is the quality of the loans. To make the investors happy, Just Loans have pooled the loans, rated by an external agency, achieved an ‘A’ rating. The result of this is that the investors look to the rating, rather than themselves trying to work out how safe all the loans are.
So Just Loans have broken new ground by attracting investors who have not previously ‘lent’ to businesses.
With interest rates so low, those with surplus deposits are constantly on the look out for places to invest that give them flexibility, a good return, and a good external view on the risk they are taking. Just Loans says that the bond does exactly that. It is tradable, carries a good interest rate, and carries a quality rating.
John Davies, Chief Executive of the Just Group, said: ‘The quality of the loans we make at Just Loans and Just Cash Flow have meant that we have been able to create this bond, and achieve an ‘A’ rating to satisfy the requirements of a new source on business investors. Another step towards ensuring that funds for small business expansion are always available,” he said.