BBB announces new commitment with Funding Circle
The British Business Bank today announces a commitment of up to £150m for lending to UK small businesses through Funding Circle, a global small business loans platform.
The transaction, under the Bank’s ENABLE Funding programme, is designed to accelerate lending to small businesses and is expected to support the growth of more than 2,000 UK firms.
The new facility will provide senior financing to a transaction with the Funding Circle SME Income Fund Limited (FCIF), a publicly traded fund that lends exclusively through Funding Circle.
This new commitment extends the existing partnership between Funding Circle and the UK Government. Since March 2013 £165m has been lent directly to the small business ecosystem through Funding Circle using the British Business Bank’s programmes, earning around £10m in cumulative net interest for the taxpayer. In 2017 alone, such lending is estimated to have created and sustained around 2,100 jobs across the UK.
Keith Morgan, CEO, British Business Bank, said: “Encouraging the development of new types and providers of finance is a key objective for the British Business Bank. We have supported the growth of peer-to-peer lending as a model since its earliest stages. It helps provide welcome choice and competition and we are pleased that this part of the market continues to expand significantly, with volumes increasing by a further 51% in 2017. By making this new commitment, more smaller businesses across the UK can get the finance they need to fulfil their growth potential.”
Small business minister Kelly Tolhurst said: “The UK’s 5.7 million small businesses are the backbone of our economy, and ensuring we cement our status as one of the best places in the world to run a business is fundamental to our modern industrial strategy.
“A key part of this is ensuring that growing businesses can access the right finance for their needs, from a range of sources and this British Business Bank commitment through Funding Circle will give small businesses across the country the option of peer-to-peer lending to help them realise their full potential.”
Sachin Patel, chief capital officer at Funding Circle said: “This significant commitment further strengthens our successful partnership with the British Business Bank and is a reflection of the work we’re doing to provide investors with attractive, risk-adjusted returns. The UK Government, through the Bank, has been a pioneer of innovation within the FinTech industry and we look forward to continuing to work together to support the growth ambitions of even more small businesses across the country.”
Funding Circle was the first platform to open up small business loans as an asset class to a diverse range of investors. To date 85,000 individuals, the European Investment Bank, the European Investment Fund, German development bank KfW and many other financial institutions have lent £5.6bn through Funding Circle to 56,000 businesses across the UK, US, Germany and the Netherlands.
Around four in ten smaller businesses go to their main bank first when they have a need for external finance, and the large banks continue to hold a dominant position in small business lending, accounting for around 80% of the market. The platform lending model has the potential to create healthy competition and choice for smaller businesses.