UK peer-to-peer lender Funding Circle is expanding its partnership with the government-run British Business Bank Investments and receiving £40m to lend to small businesses.
British Business Bank Investments previously invested £60m through the direct lending platform backing more than 10,000 businesses.
The government-owned organisation invests in challenger banks, non-bank providers of finance as well as debt and venture capital funds to increase the choice of finance for small and mid-sized businesses.
Funding Circle claims the organisation’s investments through the platform have earned a 6.2% annual return resulting in £5m in cumulative net interest on behalf of the taxpayer.
British Business Bank Investments CEO Catherine Lewis La Torre said: “Peer-to-peer lending is becoming an increasingly important source of finance for smaller businesses, with AltFi data showing an 85% increase in lending via the sector from 2014 to 2015.
“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.”
Funding Circle was founded in 2010 and claims to have facilitated the lending of more than £1.7bn to 18,000 UK businesses since.
It counts more than 55,000 individual investors on the platform alongside local authorities, the European Investment Bank and financial institutions such as pension funds.
Company co-founder and CEO James Meekings said: “Over the last six years, Funding Circle has proved to be a more efficient way for small businesses to access the finance they need to grow and expand, whilst providing investors with attractive, stable returns.
“This further lending commitment is recognition of the success of the partnership to date and we look forward to working with the British Business Bank to help thousands more small businesses.”
British Business Bank also invests through peer-to-peer financing platforms RateSetter and MarketInvoice.
It has invested £10m and £15m in the two respectively, according to Business Insider.
The new money pledged for loans follows the Financial Conduct Authority’s proposal for tougher rules regulating peer-to-peer lending, announced in December.
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