UK small businesses earmarked to receive £100 million in loans from EIB
(29 September 2015 – United Kingdom) The European Investment Bank (EIB) has earmarked £100 million (A$217.85 million) in loans directed at UK small businesses, in partnership with peer-to-peer lender, Funding Circle. The EIB hopes to replicate the initiative in other European countries.
The deal indicates growing acceptance of peer-to-peer, or marketplace lending, as a route for channelling government-backed funds to small and medium-sized enterprises.
“This is an interesting direct model for supporting small businesses, which has the potential to be quite efficient,” the bank told Financial Times.
“We’re stepping up support for both SME and infrastructure lending across Europe and we’re keen to make sure the UK is part of that. It’s important for our engagement in the UK [but] we’d also look at rolling it out elsewhere.”
The EIB is owned by member states of the EU, and classified as a non-profit bank. It borrows money on capital markets to lend on projects in areas such as infrastructure and regional development. In 2014, it lent €77 billion for projects.
Funding Circle is one of the UK’s largest peer-to-peer lender, and has facilitated £353 million in loans so far this year.
The EIB hopes to confirm terms this spring after securing support from member states.
The bank said it would spread the funds immediately and will consider a repeat deal. The EIB is also looking at expanding the initiative to the Netherlands, where peer-to-peer platforms include Geldvoorelkaar and Lendahand.
Funding Circle is preparing to launch the SME Income Fund, making it the first marketplace lender to launch its own fund. The bank the fund would be the most likely vehicle for the investment. The SME Income Fund would hold a passive selection of Funding Circle’s loans.
According to the EIB, lending through UK high street banks had been limited since the country’s central bank has been offering a similar service – the Funding for Lending Scheme – since 2012. EIB said that there is a “huge demand for initiatives to improve access to finance by small businesses across Europe”.
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