Funding Circle responds to the Budget
19 March 2014
The Chancellor made two important announcements for peer-to-peer lending in the Budget. First, that peer-to-peer lending will be included within ISAs as part of the government’s wider ISA reform (section 1.169). And second, that a new consultation will be launched into the mandatory referral of small businesses to alternative providers from banks, where they cannot lend (section 2.234).
“This news is a huge win for British investors up and down the country, and represents a seminal moment for our industry. The inclusion of peer-to-peer lending in ISAs ensures British people earn inflation-beating, tax-free returns whilst helping support the country’s economic recovery.”
SME referral consultation
Approximately 70% of businesses who borrow through Funding Circle believe they could have got a bank loan but chose us instead.
James Meekings, co-founder of Funding Circle said: “We are already talking to banks about the possibility of lead referrals for small businesses. We do see ourselves as complementary to banks. A core part of a bank’s business is having a positive banking relationship with their customer so partnering with a non-bank funder where there is no risk of them losing their current account business makes a lot of sense. The main challenge is that most businesses don’t get to the reject stage at the bank so signposting needs to start earlier.
“We helped launch the Alternative Business Funding portal last week (http://alternativebusinessfunding.co.uk/) which allows businesses to see the range of non-bank options and could be used for lead sharing.”
According to data from Funding Circle, 41% of investors said they would invest more in peer-to-peer lending if it was included within ISAs. One in ten people said they would transfer their existing stocks and shares into peer-to-peer lending.
Additionally, TISA (Tax Incentivised Savings Association) estimates that more than £50 billion is invested in ISAs every year. If just 3% of this money was channelled through marketplaces such as Funding Circle it would create more than £1.5 billion of new lending to businesses annually leading to approximately 75,000 new jobs.*
James Meekings, co-founder of Funding Circle said: “This news is a huge win for British investors up and down the country, and represents a seminal moment for our industry. The inclusion of peer-to-peer lending in ISAs ensures British people earn inflation-beating, tax-free returns whilst helping support the country’s economic recovery.
“Today’s news will open up peer-to-peer lending to a new audience. Over the last three years more than 30,000 people have lent more than £240M to over 4,000 businesses through Funding Circle – £130M of which was lent in 2013 alone. We’re excited that people will be able to use their ISA entitlements to benefit further from our unrivalled track record in the space.”
*Independent research by government think tank Nesta last year found that businesses that receive a loan through Funding Circle employ on average 11 people, and see an average increase in employment of 27 per cent after receiving finance.