British Business Bank Investments Ltd, the commercial arm of the government-owned British Business Bank, will today begin lending a further £40 million to UK small businesses through the direct lending platform, Funding Circle.
The news follows the success of the programme to date, where more than 10,000 businesses across the country have benefitted from £60 million of government lending through Funding Circle, creating an estimated 30,000 new jobs (according to research carried out for Funding Circle by the Centre for Economics and Business Research (CEBR) in August 2016).
Over the last three years, Funding Circle figures show that British Business Bank Investments Ltd has earned a 6.2 per cent annual net return by lending to small businesses through the platform, totalling £5 million in cumulative net interest on behalf of the taxpayer.
SMEs to benefit
The Funding Circle model has opened up small business lending to a wide range of investors, improving competition in the market and reducing dependency on bank lending. This latest investment is recognition of the efficiency of the direct lending model, and its ability to channel much-needed funds to the real economy, whilst providing investors with attractive, stable returns.
In November, Funding Circle became the first European online lending platform to originate more than £100 million of loans directly to small businesses in a single month. According to the same CEBR research, total lending through the platform since 2010 has contributed a £2.7 billion boost to the UK economy.
Catherine Lewis La Torre, CEO of British Business Bank Investments Ltd, says, ‘Peer-to-peer lending is becoming an increasingly important source of finance for smaller businesses, with AltFi data showing an 85 per cent increase in lending via the sector from 2014 to 2015.
‘A key part of our remit is to support the development and growth of such finance markets, while earning an attractive, commercial return for the taxpayer. We look forward to seeing our latest commitment to Funding Circle enabling the growth and success of many more businesses across the UK.’
James Meekings, co-founder and UK managing director of Funding Circle says, ‘Over the last six years, Funding Circle has proved to be a more efficient way for small businesses to access the finance they need to grow and expand, whilst providing investors with attractive, stable returns.
‘This further lending commitment is recognition of the success of the partnership to date and we look forward to working with the British Business Bank to help thousands more small businesses.’
British Business Bank Investments Ltd invests in challenger banks, non-bank providers of finance as well as debt and venture capital funds to increase the choice of finance for small and mid-sized businesses.
Funding Circle facilitates lending to small businesses from a wide range of investors, including 55,000 individuals, local authorities, British Business Bank Investments Ltd, the European Investment Bank and financial institutions such as pension funds.
Funding Circle investors have earned nearly £100 million in net interest by lending more than £1.7 billion to 18,000 businesses in the UK since 2010. Businesses funded through the platform typically access the capital they need in seven days. The CEBR research also found that 94 per cent of businesses would come back to Funding Circle first in future.