Business secretary Vince Cable pledged £55m of UK government funding to finance suppliers such as peer-to-peer (P2P) lenders in the hopes of helping struggling small businesses acquire credit via high street banks.
The pledge was made through Business Finance Partnership with match-funding from the private sector. The private sector is expected to lever a minimum of £55m more, making a pot of at least £110 million. According to P2P Finance Association, P2P finance will account for over £220 million loans this year.
The first four successful bidders for the partnership are Funding Circle, which will receive £20 million to directly offer money to small businesses, Zopa with £10 million to offer in loans, BOOST&Co with £20 million to lend £1m to £8m to innovative and growing small businesses, and Credit Asset Management Ltd with £5 million to provide professional loans and asset finance.
The new Business Bank will also offer the same type of help, but will start operation in 2014. The bank is designed to tackle long-standing structural gaps in the finance supply for SMEs.
According to Paul Aitken of lender Borro, the pledge is a great endorsement for the sector. Since many small businesses are suffering from restricted lending environment, there should be an alternative lending platform to provide them finance.
- Vince Cable pledged of government funding to peer-to-peer lenders and other finance suppliers
- With match-funding, the private sector expects to lever a minimum of £55 million, making at least £110 million
- According to the Peer-to-peer Finance Association, peer-to-peer finance will account for £220 million loans
Paul Aitken, CEO and Co-founder of Borro: “At borro, we have seen a sharp increase in SME owners and entrepreneurs coming to us. This group now makes up over half of our current customer base and in the main they come to access liquidity so they can realise a business opportunity or to ease a cash flow situation.”
Vince Cable, UK Business Secretary: “Small and medium sized businesses need access to a diverse range of finance options, including non-bank lending. These new forms of finance are still small in scale today but they should, over time, bring additional choice and greater competition to the lending market.”
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