23 Jun 2016   |   News

European Investment Bank to lend €100M to UK SMEs through Funding Circle

Bank teams up with UK online lender in show of support for alternative finance model

The European Investment Bank (EIB) is to offer £100 million of loans to UK SMEs through the online lender Funding Circle, in the first deal of its kind.

Funding Circle allows people to lend their savings directly to small businesses at a better interest rate than that offered by banks. The process of raising a loan typically takes around seven days, compared to 15-20 weeks with a bank.

The EIB estimates that the combination of its capital and the individual savings will translate into £200 million of loans to small companies over seven years.

Since it was founded in 2010, Funding Circle has arranged more than £1.25 billion in loans to 16,000 businesses in the UK.

This the first time the EIB has lent money via a peer-to-peer internet service, a channel which is gaining recognition as a more direct way to stimulate small business than injecting funds into banks.

The deal was announced days before the UK’s in/out vote on its membership of the EU. However, a spokesman for the EIB said the timing of the announcement was coincidental. “This deal has been in the works for a while now. There is no reason the bank should stop activity for political campaigns,” he said.  

The uncertainty surrounding the UK’s 16 per cent stake in the EIB, and whether it would be maintained if the country votes today to leave the EU, was an issue raised during the campaign.

EIB provided almost €20 billion in loans for small businesses across Europe last year. It also lends money for capital investments, including a recent £280 million deal with University College London to expand its campuses.

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