Funding Circle gets £40m in state backing to tackle business loan squeeze

Funding Circle has secured an extra £40m from the
Government to lend to small businesses, providing fresh
capital at a time when business borrowing is facing a
squeeze.

The firm, which pairs lenders with small companies, said the
state-owned British Business Bank will lend directly through its
platform alongside other backers including more than 50,000
individuals.

The cash injection follows £60m in earlier UK Government
support.

“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,” said
Catherine Lewis La Torre, chief executive of British Business
Bank Investments.

The European Investment Bank is also lending £100m through
Funding Circle. However, further support from Europe is under
threat following the UK’s vote to leave the EU.

Funding Circle’s co-founder James Meekings said last summer
that the firm’s ambition to create a multi-billion pound lending
scheme with the EIB was “very unlikely to happen now”. It is
thought the company began talking to the BBB after the Brexit
vote about ways to support lending during the uncertain period
after the referendum.

"We have seen an uptick from small firms, and lent out £306m
in the fourth quarter," said Mr Meekings. "What we've started to
see is businesses have gone through that uncertainty and are
taking on new projects again."

Meanwhile, the banks have reported that small businesses
shied away from borrowing in recent months. The Bank of
England found that demand from small firms for unsecured
debt slumped in the three months after the EU vote, with a net
balance of 28pc of lenders reporting a drop.

Funding Circle hopes to challenge the high street banks, which
have typically reduced lending to firms following the financial
crisis, despite several Government schemes including Funding
for Lending designed to increase loans and stimulate the wider
economy.

Around 80pc of small- and medium-sized firms are approved
for a loan when they apply to a bank, according to the British
Bankers Association.

Thetelegraphuk