The A rated tradable bond will be backed by small-and-medium sized business loans, providing them much needed financing as banks continue to scale back loans.
Alternative lender Just Loans Group wants to raise £50m in a tradable bond backed by small business loans.
The bond is A rated making it the first of its kind, the company claims.
“We are delighted with this credit rating, as it recognises both the strict underwriting criteria we apply, coupled with the very high level of security we take on each loan,” said John Davies, Just Cash Flow director, which is part of Just Loans Group.
Small businesses are a significant part of the UK economy, accounting for 99.3 per cent of all total private businesses in 2016, according to the Federation of Small Business. Around 60 per cent of private sector employees in the UK are employed by SMEs.
SMEs have found it increasingly hard, however, to obtain loans from banks and are instead looking to the alternative financing space. More and more small businesses are using peer-to-peer and marketplace lending platforms, according to an August 2016 report.
Two other UK banks have also announced they are increasing their SME lending in the new year. Metro Bank will provide £1bn in funding to small businesses, while Barclays launched a service on its app to help businesses get funding in less than an hour.
The bond was issued through Escher-Marwick PLC and Bedford Row Capital Advisers acted as arranger and lead manager.