Funding Circle, the world’s largest peer-to-peer/marketplace lender for small businesses, has scored a fresh £40m in funding from British Business Bank Investments Ltd. Prior to this new commitment, the government-owned British Business Bank had invested £60m into over 10,000 small businesses via the Funding Circle platform, creating an estimated 30,000 new jobs.
The renewed programme comes in the wake of Funding Circle co-founder James Meekings’ call for the British Business Bank to step up in support of small businesses post-Brexit. The plea came after the Brexit vote left Funding Circle’s planned multi-billion pound funding programme with the European Investment Bank (EIB) “very unlikely” to continue. The EIB agreed to invest £100m into UK SMEs via the Funding Circle platform in June, alongside a £25m investment in the Funding Circle SME Income Fund from the European Investment Fund (EIF).
Funding Circle is not the only platform to have worked alongside the British Business Bank. MarketInvoice, RateSetter and Liberis have also been used as distribution channels, although for smaller amounts of money.
Recent coverage in the mainstream media has cast aspersions on the British Business Bank’s activities within the peer-to-peer lending sector, in light of some of the concerns that were identified by the FCA in its latest post-implementation review update, and of course the fact that the Bank is funded by taxpayer money. But Funding Circle has been quick to point out that British Business Bank Investments Ltd has earned a 6.2 per cent annual return by lending to small businesses via the platform over the last four years. This equates to cumulative net interest on behalf of the tax payer of around £5m.
In addition to individual and institutional investors, Funding Circle has blazed the trail as a distribution channel for local and government entities. The platform also fields capital from a growing number of local councils and administrative bodies.
“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,” said Catherine Lewis La Torre, CEO of British Business Bank Investments Ltd. “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.”