Today, the Government will announce their plans to join Funding Circle and lend £20 million to businesses directly through our marketplace. This is exciting news and represents the first time a UK Government has directly lent money to growing businesses in this way.
We understand this news represents a significant evolution for Funding Circle and we wanted to share with you how this will work, and the new lending opportunities we believe it will create for all investors.
Why is the Government doing this?
Despite many initiatives to stimulate bank lending over the last few years, net lending to businesses has continued to decline. Whilst bank lending to businesses has deteriorated, Funding Circle has rapidly grown. In two years since we launched, thousands of British people have helped to lend £65 million to more than 1,300 businesses. Last month investors lent £7m to British businesses.
The Government has now recognised the impact that non-bank channels, such as Funding Circle, can play to help ease the flow of finance to businesses.
How will it work?
The Government plans to lend £20 million to British businesses through Funding Circle over the next 12- 24 months. This is subject to parliamentary approval and agreement of legal terms and conditions.
The current proposal is that:
- The Government will lend on every loan that comes on to the marketplace and fund up to 20% of each loan at the average rate
- We believe this is the clearest option and enables the Government to fulfil its wishes to participate in every loan whilst having no adverse effect on investors’ bidding experience