Business Bank to support peer-to-peer lending

The British Business Bank will invest £40 million to support peer-to-peer lending to small and medium-sized businesses (SMEs).

The investment in the peer-to-peer lender Funding Circle will start on 1 March 2014 and is predicted to support around £450 million of lending over the next 18 months.

Under the agreement, the state-owned bank will fund 10 per cent of each loan, with 90 per cent from private investors. This will reduce to five per cent after the first £35 million has been invested.

This builds on an earlier £20 million investment in Funding Circle through the Business Finance Partnership (BFP). This resulted in £130 million of credit being passed on to SMEs.

In total, the bank's commitments will support over £800 million of lending:

  • Current commitments total £85 million
  • This will support £575 million of lending capacity to SMEs
  • The BFP invested £87 million, which supported £197 million of lending.

The Business Secretary Vince Cable said:

"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."

Peter Wilson, managing director of the British Business Bank's Investment Programme, said:

"The pace is really starting to build in terms of the momentum of our commitments and the impact that our Investment Programmes are making. The pipeline of future commitments is strong and we are seeing continuing interest through new applications to the programme."