RBS to suggest peer-to-peer lending to small businesses rejected for a bank loan
Peer-to-peer lending estimated to be worth £1.7bn and growing 200% year-on-year
With news that more and more small and medium businesses are being rejected for credit loans, the Royal Bank of Scotland (RBS) has announced that is to refer businesses to alternative finance providers Funding Circle and Assetz Capital from next week.
Accounting for 47% of the UK’s turnover and 60% of its employment – according to the government’s recent growth dashboard updates – small and medium firms are clearly of vital importance to the economy, but not receiving the financial support needed for growth. In a bid to rectify this RBS expects to advise thousands of businesses to consider peer-to-peer lenders.
Peer-to-peer lending has thrived from the ashes of the financial crisis and was estimated to be worth £1.7bn last year, with half of that sum business lending according to research by The University of Cambridge and Nesta. Peer-to-peer lending uses low-cost online platforms to allow investors to lend directly to individuals and businesses. RBS estimates the market contributed 1% of total lending to small businesses but was growing by 200% year on year.
Launched in 2010 by 2012 Young Guns Samir Desai, James Meekings and Andrew Mullinger, Funding Circle is currently the UK’s fourth largest net lender to small businesses, enabling more than 7,000 businesses to borrow £490m.
The Referral scheme will be piloted in Scotland and South-West England from next week with the aim to expand the scheme nationally over the coming months.
The news comes months after Santander announced a similar scheme and was the first UK high street bank to do so.
Funding Circle co-founder, Samir Desai, said: “Partnering with the UK’s biggest small business high street lender is a huge vote of confidence in our model”.
While chancellor George Osborne – who plans to make such referrals compulsory depending on the outcome of the upcoming General Election– commented: “A key part of our long-term economic plan is to ensure that British businesses are able to access the finance they need to grow and succeed.”