Glasgow Chamber first in UK to partner with Funding Circle
30 June 2014
Glasgow has become the first UK Chamber of Commerce to form a partnership with peer–to-peer lending platform, Funding Circle, through a joint venture with Glasgow City Council.
- Partnership with online marketplace to raise awareness of alternative funding methods and help businesses access finance
The relationship is designed to raise awareness of alternative funding routes, ultimately helping businesses to gain access to finance.
One aspect of the partnership will be direct lending, available to businesses within the Glasgow Metropolitan Area (G and PA postcodes), Glasgow Chamber of Commerce will invest in businesses operating in the key sectors set out by the Glasgow Economic Commission.
The distinct partnership with Funding Circle will allow Glasgow Chamber of Commerce to deliver a campaign to raise awareness of the currently under-utilised opportunity in Scotland, where only a small percentage of borrowed finance stems from alternative funding methods.
Glasgow Chamber will join thousands of people already lending their money to small and medium sized businesses across the country. The government-backed British Business Bank and other councils have also signed up to lend money directly to businesses through Funding Circle. Since launch in 2010, investors have lent £14.8 million to businesses in Scotland, and over £300 million nationwide.
A potential model for the future of small business lending, this pilot scheme will help realise the growth potential of Glasgow businesses which are currently being stifled by poor access to finance.
Last year, Glasgow Chamber of Commerce published research which demonstrated the ongoing demand for finance amongst Scottish businesses. This aligns with Recommendation 17 of the Glasgow Economic Commission (GEC), advising the city’s economic development partner to ‘utilise a range of innovative funding and other mechanisms’ to promote growth.
Projects director for Glasgow Chamber of Commerce, Alison McRae, said: “Funding Circle is an extremely novel approach to business finance, effectively creating a marketplace for borrowing.
“As a Chamber of Commerce one of our main goals is to encourage business growth and this is only achievable if funding is available. Through our partnership with Glasgow City Council we are directly assisting established businesses working in the target sectors identified by the Glasgow Economic Commission so our motivation is very focused.
“We have already identified that many Scottish firms are missing out on the opportunities presented by crowd-funding and we hope our involvement can stimulate the market. Uptake across the country is currently extremely low so our ambition is to reverse this trend.”
At the end of 2012, Lancashire County Council became the UK’s inaugural local authority to begin lending directly to businesses via Funding Circle, while the University of Huddersfield is also lending and putting all interest earned towards a student scholarship programme.
Samir Desai, CEO and co-founder of Funding Circle commented: “Since launch, Funding Circle investors have lent £14.8 million to small businesses in Scotland. This partnership with Glasgow Chamber of Commerce will allow us to help even more of the region’s businesses and raise the profile of alternative sources of finance.
“We’re beginning to see more and more interest from councils and organisations looking to use the Funding Circle marketplace as a way of boosting lending to businesses in their local regions. About £7 million of lending has been facilitated by five councils so far and a further three have recently started to lend. We strongly believe this network will evolve over the next period to create a blueprint for an equivalent 21st century regional banking network.”
Bailie Liz Cameron, Executive Member for Jobs and the Economy at Glasgow City Council, went on to say: “This is great news for businesses in the Glasgow area, a Scottish first for the city and a UK first for Glasgow Chamber of Commerce. Funding Circle is another example of the innovative approach to growing the economy taken in Glasgow, and I look forward to the success of this project and the companies taking part in the platform.”
To be eligible, businesses must typically have a minimum turnover of £100,000 and have been trading for at least two years. Once businesses pass Funding Circle’s credit assessment processes, their loan is posted on the marketplace. From here, investors choose which type of businesses to lend to, and bid the amount of money they wish to lend, and the interest rate they want to earn. Investors can bid small amounts, from as little as £20, on lots of different businesses to spread their risk.
The Chamber’s lending will be split across approximately 10 – 20 businesses over the next 6 – 12 months based upon demand, and will form a percentage of each loan alongside private co-investment. The Chamber and Funding Circle will also run peer-to-peer lending workshops for small businesses interested in trying the model, in September and November this year (Thursday 4 September 8-10am and Thursday 13 November 5-7pm).
For information about Glasgow Chamber of Commerce’s involvement with Funding Circle please contact Blair Stevenson on firstname.lastname@example.org.
(1) In 2013 Glasgow Chamber of Commerce commissioned a piece of research in partnership with Tim Wright, founding director of Twintangibles, which noted that 56 per cent of SMEs in Scotland are actively seeking finance or an average loan of £5,000-£50,000, funds which are well within the commonly raised totals by crowd-funding campaigns.