Small business loans through Funding Circle boost UK economy by £2.7 billion
11 August 2016
Research published today by the Centre for Economics and Business Research (CEBR) revealed that small business loans facilitated by Funding Circle, the UK’s leading direct lending platform, have boosted the UK economy by £2.7 billion since 2010.
- Investors lending through the platform since 2010 have supported ~40,000 new jobs
- Businesses in regions that have faced economic hardship, such as the North, are benefiting
- Small housebuilders have built ~2,200 homes
Over the last six years, thousands of investors lending through the platform have helped more than 15,000 businesses to access finance, supporting the creation of approximately 40,000 jobs across the country. Over three fifths (61%) of borrowers saw their revenue increase as a result of taking a loan, while nearly half (47%) reported a rise in profits.
The report finds that businesses are drawn to direct lending platforms by the speed and simplicity of the loan application process. Nearly three quarters (72%) of borrowers found the experience of obtaining a loan faster than other providers they considered. This helps to explain why 77% initially shopped around for finance, but 94% would come back to Funding Circle first in future.
The Funding Circle model, where thousands of investors lend directly to UK small businesses, has proved to be a more efficient way for businesses to access the finance they need to grow and expand. By supporting UK businesses, investors have earned more than £95 million of net interest, helping businesses across the country and across all sectors, including high growth areas such as technology. Investors include 50,000 people, local and national government, and a range of financial institutions such as pension funds.
Scott Corfe, Director at the Centre for Economics and Business Research said: “Since the financial crisis, UK businesses have increasingly turned to non-bank lending to raise the funds they need to invest, hire new staff and expand to new markets. Companies such as Funding Circle are driving billions of pounds of economic activity and generating tens of thousands of jobs, something that’s set to grow rapidly as the financial landscape continues to evolve.”
Funding Circle co-founder and UK Managing Director James Meekings commented: “It’s hugely rewarding to see the real and measurable effect that lending through Funding Circle is having on the UK economy. Small business isn’t small – it accounts for half of the UK’s GDP and 60% of employment. That’s why we have created the infrastructure where any investor, whether they’re an individual, financial institution or government body, can lend to small businesses.”
Mike Cherry, National Chairman of the Federation of Small Businesses, said: “Small firms make up 99 per cent of all businesses in the UK so are vital if we want to boost jobs and growth across the economy. It’s clear that direct lending platforms, like Funding Circle, are helping to foster competition in the small business finance market. Our own research shows that, among those applying for credit, usage of these platforms rose from 3.9% to 9.0% in the last year alone. FSB will continue to encourage businesses to explore alternative sources of finance.”
Supporting businesses in the North
Finance generated through Funding Circle is also supporting small businesses in the North – a region that has faced economic hardship and that the Government is trying to target with a set of growth-boosting initiatives. A tenth (10%) of loans go to businesses in the North East, a region which accounts for just 3% of all UK businesses.
Unleashing the potential of small housebuilders
Small businesses also include small housebuilders, who play a crucial role in helping to alleviate the ongoing housing crisis yet still struggle to access finance through traditional channels. CEBR found that since Funding Circle launched property finance loans in 2014, lending has helped small property developers to build approximately 2,200 homes across the country.
Launched in 2010, Funding Circle is sparking a global revolution in the way small businesses access finance. By bringing together industry leading risk management policies and cutting edge technology, Funding Circle’s proven model strips out the need for inefficient bank processes, enabling businesses to access finance in a matter of days directly from investors.
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Funding Circle (www.fundingcircle.com) is the world’s leading online marketplace for business loans, matching small businesses who want to borrow with investors who want to lend in the UK, US and Europe. Since launching in 2010, investors at Funding Circle – including 50,000 individuals, local and national government and financial institutions – have now lent £1.4 billion to 15,000 businesses. Approximately 10% of investor money now comes from Government sources, including the British Business Bank, European Investment Bank, KfW, the German government-owned development bank, and local councils across the UK.
Funding Circle was the first direct lending platform to announce a formal referral partnership with Santander, one of the UK’s leading high street banks, and has since announced a similar partnership with RBS. It has raised $273m in equity capital from the same investors that backed Facebook, Twitter, Airbnb and Wealthfront.
Cebr, Centre for Economics and Business Research, is an independent consultancy with a reputation for sound business advice based on thorough and insightful research. Since 1992, Cebr has been at the forefront of business and public interest research. They provide analysis, forecasts and strategic advice to major UK and multinational companies, financial institutions, government departments and agencies and trade bodies. For further information about Cebr please visit www.cebr.com