The Guardian: RBS to suggest peer-to-peer lending to rejected business loan applicants
UK’s biggest lender to small businesses unveils move following criticism that banks are failing to support small firms.
Royal Bank of Scotland, Britain’s biggest lender to small businesses, will start steering rejected corporate loan applicants to alternative finance providers from next week.
RBS, which provides a third of all lending to small and medium-sized enterprises in Britain, said it expects to advise thousands of businesses to contact peer-to-peer lenders Funding Circle and Assetz Capital.
The scheme comes ahead of government plans to make such referrals compulsory after criticism that Britain’s biggest banks are failing to provide sufficient credit to a sector the government sees as having an important role in stimulating the economy.
“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,” George Osborne said.
Peer-to-peer lending has grown rapidly since the financial crisis of 2007 to 2009, with bank credit remaining scarce for small businesses. These new services allow investors to lend directly to individuals and businesses via low-cost online platforms.
Peer-to-peer lending in Britain was worth £1.7bn pounds last year – with nearly half of it business lending, according to a study by the University of Cambridge and charity Nesta.
RBS said the peer-to-peer market contributed about 1% of total lending to small businesses but was growing by 200% a year.
The RBS referral scheme will be piloted in Scotland and south-west England from next week, with the intention of expanding it nationally over the next three months.
Funding Circle, which launched in 2010, is now the fourth-largest net lender to small businesses in Britain and has so far enabled more than 7,000 businesses to borrow £490m.
“Partnering with the UK’s biggest small business high street lender is a huge vote of confidence in our model,” its founder Samir Desai said.
Santander began a similar relationship with Funding Circle last year.
- January 22, 2015