Bypass the bank with new peer-to-peer lending scheme for small businesses

Bypass the bank with new peer-to-peer lending scheme for small businesses

Have you heard of peer-to-peer lending?

The practise involves private savers lending money to businesses and projects via an online peer-to-peer lending website – effectively enabling anyone to become a financial broker.

This allows small and medium enterprises (SMEs) to secure funding without going through a traditional financial intermediary, such as a bank or loan company.

Peer-to-peer lending has been around since the mid-1990s, but its popularity has surged in recent years following the 2008 global financial crisis that resulted in banks becoming far more scrupulous with lending, making it harder for businesses to secure loans.

In June, the Glasgow Chamber of Commerce announced that it would be the first in the UK to offer funding via peer-to-peer lending for loans between £5000 and £150,000.

Today, it will start contacting the 13,600 businesses deemed eligible to apply.

It announced a partnership with Funding Circle – the UK’s first peer-to-peer lending website – in a project designed to raise awareness of alternative funding avenues for SMEs.

The new programme is a joint venture with Glasgow City Council following research suggesting 56% of Scotland’s SMEs are actively seeking loans valued between £5000 and £50,000.

How Funding Circle Works

In order to be granted a loan from the Glasgow Chamber of Commerce, a business must have its headquarters in the Glasgow metropolitan area – in other words, they must have a G or PA postcode.

Businesses will also need to have three years of trading and be in one of the following key sectors:
•Financial and business services
•Low carbon industries
•Engineering, design and manufacturing
•Life sciences
•Tourism and events
•Creative industries

Alison McCrae, the project’s director, believed the new programme would help local businesses find alternative financial solutions and help raise awareness of crowdfunding.

“One of the things raised from our work looking into Glasgow’s future was access to alternative funding resources.

“Last year we commissioned a piece of work to look at crowdfunding and what was the opportunity for businesses in the metropolitan city region and the wider country.

“It was quite clear that there wasn’t as much take up as one would have expected and part of that was down to a lack of awareness.

“So that is why we have gone into this partnership with Funding Circle.

“The reason we chose Funding Circle is because they are the longest standing, most established and reputed peer-to-peer funding platform in the UK.

“We have been working with them for the last 12 months to get this project off the ground and really our aim is raise awareness of crowdfunding and how you can use that as an alternative finance.

“As well as using this to raise awareness, we are also working with Funding Circle to put on how to do crowdfunding workshops, so that people can actually understand the detail of what is involved in it.”