As small businesses continue to apply for fewer loans through high street banks, alternative lenders are having their moment.
That’s because the British Business Bank (BBB) has now extended their existing partnership with alternative loans platform Funding Circle and has committed up to £150 million in new lending for UK small businesses.
The transaction is made under the Bank’s ENABLE Funding programme and is expected to support the growth of more than 2,000 UK firms.
What is Funding Circle?
Funding Circle, founded in 2010, offers peer-to-peer unsecured loans of £10,000 – £500,000 to small businesses and gives users the option to repay their loan in full without incurring extra charges while interest rates start from 1.9 per cent per year. To date, 85,000 individuals, the European Investment Bank and other funds and banks have lent £5.6 billion through the platform to 42,000 UK businesses.
What is the British Business Bank?
The British Business Bank is a government owned institution which aims to increase the supply of money to smaller businesses who may be rejected by a high street bank for a loan. On their website they say they want to help to ‘create a more diverse finance market for smaller businesses, with a greater choice of options and providers’ and believe that the platform lending model has the potential to create healthy competition and more choice for smaller businesses.
Together, the firms have lent £165 million to small business since 2013.
Further reading on peer-to-peer lending
Keith Morgan, CEO, British Business Bank, said, ‘Peer-to-peer lending helps provide welcome choice and competition and we are pleased that this part of the market continues to expand significantly, with volumes increasing by a further 51 per cent in 2017.’
Small Business Minister Kelly Tolhurst, who recently spoke at the British Small Business Summit in London said, ‘The UK’s 5.7 million small businesses are the backbone of our economy, and ensuring we cement our status as one of the best places in the world to run a business is fundamental to our modern Industrial Strategy.
‘A key part of this is ensuring that growing businesses can access the right finance for their needs, from a range of sources and this British Business Bank commitment through Funding Circle will give small businesses across the country the option of peer-to-peer lending to help them realise their full potential.’
Sachin Patel, chief capital officer at Funding Circle said, ‘This significant commitment further strengthens our successful partnership with the British Business Bank… The UK Government, through the Bank, has been a pioneer of innovation within the FinTech industry and we look forward to continuing to work together to support the growth ambitions of even more small businesses across the country.’