The Royal Bank of Scotland has struck an arrangement with leading peer to peer lenders Funding Circle and Assetz Capital that should give UK small business a boost. RBS announced it will now formally refer small business borrowers to P2P lenders. The strategic shift is expected to give “thousands of small British Businesses greater access to finance”. The arrangement with RBS is similar to a deal Funding Circle created with Santander Bank last year. The Chancellor of the Exchequer George Osborne lauded the arrangement;
“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. And it’s only through harnessing innovations in finance, alongside our existing world class knowledge and skills in financial services, that we’ll ensure Britain’s financial sector continues to meet the diverse needs of businesses here.
“That is why I announced a further package of measures to support peer-to-peer platforms at last month’s Autumn Statement, including a new bad debt relief to create a level-playing field for the industry. It is great to see companies like Funding Circle forging a new partnership with RBS to ensure that small British companies have the best access to funding.”
Osborne has consistently advocated on behalf of small enterprise, noting the job creation and associated economic benefits of a dynamic entrepreneurial sector. In recent years the UK has become a center of innovation with a fast growing startup scene that is starting to challenge other global innovation regions.
Funding Circle shared that from next week the bank will refer businesses to P2P lenders for small business loans, where the online marketplace is better placed to help. The high street bank accounts for 33% of the small business lending market, so is set to become the largest lender to refer small business customers. The pilot begins next week in Scotland & South-West England; with a national roll-out in Business Banking following over the next 3 months.
“This partnership recognises our role as the largest marketplace for unsecured and secured small business lending. Partnering with the UK’s biggest small business high street lender is a huge vote of confidence in our model, and we look forward to working together to create thousands more opportunities for small businesses to access finance and grow.”
Funding Circle allows small businesses to borrow directly from investors. To date, more than 7,000 businesses have borrowed £490 million, thanks to a rigorous and proven credit assessment process. Investors are currently lending £35 million per month, making Funding Circle’s marketplace the fourth largest net lender to small businesses in the UK.
Funding Circle and RBS have been part of the Treasury’s working group examining how best to encourage greater collaboration between high street banks and alternative finance providers. The bank seeks to expand choice for customers whose loan applications do not currently meet the bank’s criteria, by pointing them to alternative finance providers. Referrals will take place during conversations that the customer will have with a relationship manager or through documents included with correspondence.
— RoyalBankofScotland (@RBSGroup) January 22, 2015
Alison Rose, CEO Commercial and Private Banking at RBS commented, “we are committed to doing the right thing for our customers by helping them access finance where we cannot help them within our current risk appetite. I am delighted to see RBS partnering up with both Funding Circle and Assetz Capital. We are dedicated to supporting SMEs, whether they are an existing customer of RBS or not.”
The Royal Bank of Scotland, based in Edinburgh, was founded in 1727. The established banking institution is a global firm with offices around the globe. Following the financial challenges of the last decade the bank has restructured. Funding Circle was founded in 2010 and has quickly lent almost half a billion pounds to SMEs. Assetz Capital was founded in 2013.
Peer to peer lending has rapidly grown in the United Kingdom as an alternative to traditional banks. Both investors and borrowers have discovered superior interest rates accompanied by a much easier process on a growing number of peer to peer lending platforms.