Funding Circle Receives £40m investment from the British Business Bank
Investment Demonstrates the Growing Importance of Peer to Peer Platforms
Peer to peer lending has become a very high-profile industry throughout the financial sector in recent years, and what was once an innovative but unproven concept is now a major force in the UK financial industry. The growing importance of P2P platforms in the UK is demonstrated by the Government-owned British Business Bank’s (BBB) decision to provide £40m in funding to The Funding Circle, a leading peer to peer investment platform.
Why has the British Business Bank invested £40m in The Funding Circle?
Firstly, this isn’t actually the first time that the BBB have invested in The Funding Circle; in 2013, the organisation deposited £60m to help finance small and medium enterprises throughout the UK. This proved to be a prudent move; the bank has received over £5m in interest over the past three years, as well as helping British industry to grow. This reflects the bank’s commitment to sustaining British businesses whilst also earning an attractive return for the taxpayer.
How has the British Bank Business’ £40m investment helped businesses?
By providing a large amount of funding to The Funding Circle, the BBB has made it easier for small businesses to receive loans. The availability of funds determines how cheap it is to secure a loan; if there’s a lot of money on offer, businesses can be offered relatively low interest rates when they borrow money. At the time of writing, deposits from the BBB had been used to finance loans to more than 10,000 companies, equating to £64m of lending.
How does The Funding Circle work?
The Funding Circle is a specialised P2P platform which offers loans to small and medium sized businesses. Although the majority of their funding has come from the BBB, the platform is open to individual investors as well, and offers an attractive rate of return. Funds invested in the Funding Circle are supplied to businesses in the form of loans, and the interest on these loans goes directly to their investors – this is the exact model which the BBB used when making their deposit, since they don’t finance British businesses directly.
What does this mean for Peer to Peer lending in general?
This is a major acknowledgement of the important role of peer to peer lending in the future. Clearly the technology offers a viable way for both borrowers and investors alike to achieve their goals, and the BBB’s investment only serves to highlight how prevalent peer-to-peer platforms have become in recent years.
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