Edinburgh-based LendingCrowd will use the funds to invest in a number of qualifying Scottish businesses as well as private sector investors.

The investment is the SIB’s first venture into the alternative finance market and is expected to stimulate loans of up to £35m to Scottish small- and medium-sized enterprises (SMEs).

Kerry Sharp, head of SIB, said: “We recognise that many Scottish companies continue to struggle to raise the funding they need to grow, and evidence points to substantial gaps in the supply and demand for finance within the Scottish market.

“Under our expanded remit, we are increasing the diversity of finance provision in Scotland, and this new initiative with LendingCrowd is the first example of how we are opening up innovative sources of alternative funding to Scottish SMEs.

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“Peer-to-peer lending is one of the fastest growing areas of alternative finance and this initiative with LendingCrowd will increase competition in the marketplace and provide greater diversity and choice for Scottish SMEs.”

Borrowers will apply for loans of between £5,000 and £250,000 over terms ranging from six months to five years.

Applicants will apply directly to LendingCrowd who will undertake the appropriate due diligence on each case.

Stuart Lunn, CEO of LendingCrowd, added: “Our groundbreaking agreement with Scottish Enterprise, one of the first initiatives of its kind in Europe, will help to fund the next stage of growth for some of Scotland’s most exciting SMEs.

“This recognises the increasing importance of peer-to-peer access to finance and, in practical terms, will allow a significant number of small- to medium-sized businesses the chance to pursue their ambitions to expand and compete in the UK and internationally.”

The Scottish Investment Bank is the investment arm of Scottish Enterprise, Scotland’s main economic development agency.