Alternative lenders set to foot £7bn university bill

Alternative funders look set to have an increasing role to play in the funding of both universities and, in turn, small businesses across the country.

Recent changes to the ways in which universities are funded are expected to incur costs to the government of more than £7 billion, according to a recent report in the independent, despite saving almost £1.17 billion after funding was removed from the Higher Education Funding Council for England scheme.

In light of ballooning tuition costs and ever-improving A-level grades, too, it seems even more important that students, through their chosen universities, can access crucial extra funding.

Known as the Business Lending Partnership, Funding Circle’s recently-announced scheme alongside the University of Huddersfield has set a precedent for commercial and alternative lenders to start providing capital for non-traditional institutions.

Using Funding Circle, the university will lend an initial tranche of £100,000 to small businesses across the UK. The initiative seeks to support SME pioneers of the present and future, with all interest earned by the university’s investments to be put towards student scholarships for the University’s ‘Enterprise Development’ degree. Over the next five years, it is expected that more than 200 students from socially deprived backgrounds will gain access to the course.

Both Funding Circle and the university will also develop a series of seminars and internship opportunities with borrowers to ensure that the upcoming generation of business leaders can gain hands-on experience with flourishing British businesses as part of their degrees.

Speaking about the scheme, Funding Circle’s Business Development Manager Laura McMullen said: ““In today’s economy, businesses want access to finance quickly with minimal disruption. This partnership will ensure businesses get both the finance they need to grow and access to world class research and development facilities through Huddersfield University.

“At the same time, it will provide much-needed work experience with companies that are the lifeblood the UK economy. There are over one hundred universities in the UK – if the University of Huddersfield’s investment can help to support 200 students over five years, imagine the possibilities.”

Similar schemes are being adopted by universities at the moment, however, as they begin to understand how alternative forms of funding can both improve opportunities for students and allow the institutions themselves to access to further funding.

Kingston University in London offers a similar programme centred around its Knowledge Transfer Partnerships.

SMEs can approach Kingston for help in paying for various enterprise services, including business consultancy, contract research and bespoke professional development as well as facility and equipment hire, through vouchers provided by the university. Any local firms within specific sectors can apply for the vouchers to spend them on relevant services. In return, these firms will often fund scholarships for students or may offer low-interest, medium term loans to cover the cost of their stay at Kingston, especially to offset the cost of living.

Similarly, Kingston also offers a knowledge transfer system, through which businesses can gain additional expertise through exposure to university tuition and students can be initiated into fitting business practices.

Almost identical schemes are also run by the University of Liverpool and Cardiff University, both of which emphasise the importance of an exchange of knowledge as well as allowing additional students to study where they otherwise might not have been able to.

Huddersfield’s partnership – the first known direct link between a funder and a university - is the brainchild of Vice-Chancellor Professor Bob Cryan, who is committed to strengthening the University’s links with businesses.

He said: “Working with Funding Circle in this way allows us to boost our scholarship fund and provide an injection of capital funds to thriving British businesses at the same time. At Huddersfield, we pride ourselves on our business degrees and graduates. The Business Lending Partnership will help us to strengthen our ties with businesses across the UK, which can only benefit our students.”

“This partnership represents the University of Huddersfield’s commitment to the future of British business. Together we will support entrepreneurs active in today’s business world while at the same time helping young business people develop the right knowledge and skills for the future.”

The investment is Funding Circle’s third institutional partnership, having already announced schemes to lend to businesses through a local authority and Government, but is the first to be made with a University. A successful introduction will hopefully lead not only to more ties being made with Funding Circle, but also with other alternative funders who can offer struggling universities a widely beneficial range of capital and services.