Lender lands £40m of Government funding

Lender lands £40m of Government funding

A specialist lender has acquired £40 million of government funding from the British Business Bank.

A specialist lender has acquired £40 million of government funding from the British Business Bank.

Funding Circle has acquired its second tranche of government funding, after completing its initial £20 million tranche of funding.

Last March the Government began lending to British small businesses through Funding Circle, via the Business Finance Partnership scheme.

Funding Circle has now lent out the entire £20 million commitment to over 2,000 businesses across the country. Together with private co-investment, the Government money has facilitated over £140 million.

Business Secretary Vince Cable said: "The Business Bank is helping to support serious volumes of lending to small and medium sized businesses through new finance providers. Too much business lending is concentrated in the big banks and, if we’re to have a properly functioning business lending market, they need to be challenged by new banks, peer-to-peer lenders and other alternative providers."

Independent research by government think tank Nesta last year found that businesses that receive a loan through Funding Circle employ on average 11 people, and see an average increasing in employment of 27 per cent after receiving finance.

The initial government tranche has created an estimated 6,500 jobs across the UK.

Funding Circle has now helped lend more than £220 million to over 4,000 businesses in three-and-a-half years, £140 million of which was lent in the last 12 months.

The Government-backed British Business Bank Investment Programme has now decided to invest a further £40 million alongside private investors.

The British Business Bank Investment Programme is a part of the British Business Bank programme, which is currently run directly by the Department for Business, Innovation and Skills and is not authorised or regulated by the Financial Conduct Authority or the Prudential Regulation Authority.

The objective of the British Business Bank programme is to support economic growth by bringing together public and private sector funds to create more effective and efficient finance markets for smaller businesses in the UK.

The investment through the Funding Circle platform is made alongside investors from the private sector on equivalent terms and represents the final 10% of funding requested by a borrower, once private sector lending has reached 90% of the requested amount. The British Business Bank programme’s funding does not provide an endorsement, recommendation or any warranty, either expressed or implied, about the creditworthiness of a borrower or the activities and procedures of Funding Circle, and its funding has the same risk of loss as for any private sector investor.

Neither the British Business Bank programme, the Department for Business Innovation and Skills nor any other government department or agency is involved with the operation or management of Funding Circle.

This further lending commitment recognises the contribution that non-bank channels, such as Funding Circle, can play to help ease the flow of finance to businesses.

Funding Circle believes that the second tranche of money proves that there are more accessible, effective channels for small business lending.

The Government has done a great deal to help raise the profile of non-bank lending in the last year, and peer-to-peer lending has provide itself to be the preferred way for many businesses to borrow (77 per cent of businesses who have borrowed through Funding Circle have indicated that they would go back to the lender first before approaching a bank).

Figures from the UK Peer to Peer Finance Association show that lending increased by 121 per cent during 2013, with cumulative lending at the end of quarter four hitting £843 million compared to just £381 million at the end of 2012.

A consultation is currently under way into how the FCA will regulate the crowdfunding and peer-to-peer industries. The government is also expected to soon allow the inclusion of P2P within ISAs, giving lenders a tax-free return on their investments.

Funding Circle is lending an average £5 million worth of loans per week.

The £40 million investment is subject to legal sign off.


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