LONDON — The UK government has given peer-to-peer lending platform Funding Circle an extra £40 million to lend to small businesses.
The funding comes from the state-owned British Business Bank and means the total cash invested on Funding Circle’s platform is now £100 million. The British Business Bank committed £60 million to the platform in 2013.
That money has reportedly been distributed across 10,000 UK companies and earned the British Business Bank £5 million in net interest, according to a release from the British Business Bank sent to BI on Thursday. A Freedom of Information request seen by BI shows the British Business Bank money has funded £64 million worth of loans.
Catherine Lewis La Torre, CEO of British Business Bank Investments, says in an emailed statement: “Peer-to-peer lending is becoming an increasingly important source of finance for smaller businesses, with AltFi data showing an 85% 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.”
The British Business Bank was set up by the government in 2012 with £1 billion of funding to increase funding to small and medium enterprises (SMEs). It does not finance SMEs directly but works through partners and intermediaries to extend funding.
Funding Circle will loan the money it has secured to small British businesses. The money will not be invested in Funding Circle itself but on its platform, which matches investors with businesses looking to borrow.
James Meekings, cofounder and UK managing director of Funding Circle, says in a statement: “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.
“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.”
Funding Circle has over 55,000 investors on its platform, including individuals, local authorities, and financial institutions. It has lent over £1.7 billion since 2010.
Funding Circle is one of three peer-to-peer lending platforms which the British Business Bank invests through. The other two are RateSetter and MarketInvoice. The CEO of the Taxpayers Alliance told Business Insider last month he thinks the practice is “extremely concerning” given the financial regulator recently flagged “concerns” around the growing industry.
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