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Peer-to-peer lending 'can revolutionise' business lending

Date Added: 17/01/2013  

The business lending sector in the UK could be revolutionised in the coming years by the rise of peer-to-peer lending, it has been claimed.

According to James Meekings, the founder of Funding Circle, this will prove to be good news for investors, small businesses and the economy as a whole.

Writing for the Daily Telegraph, he explained the economy remains in trouble at the present time, despite there having been encouraging signs in recent weeks and months.

Mr Meekings highlighted the fact that confidence is "fragile" and growth remains "weak", noting that since the start of the recession in 2008, lending to small firms has "collapsed".

"A series of government initiatives has so far failed to get the banks to start lending again. The result is that thousands of well-run and profitable businesses are struggling to get the money they need to invest, grow and hire more staff," he said.

The latest of these is the Funding for Lending Scheme, which has been criticised by industry groups such as the Federation of Small Businesses, which stated loans are still only going to be approved to a few of those in need of money to fuel their growth.

Mr Meekings suggested peer-to-peer lending - which matches people who want to lend money with successful firms which want to borrow - can help to solve business lending problems.

He pointed out that even though this represents only a "tiny" part of the market at the present time, growth has been strong and there are signs it could become a viable option in future.

The Bank of England's director of stability Andy Haldane recently noted how even companies like Google were small once, so Funding Circle has the potential to be an important firm.

Mr Meekings suggested one way that the government could improve the current situation for peer-to-peer lending is to make the interest investors receive on their loans to small businesses tax-free, as this would make taking part more appealing.

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Posted by Miles Pritchard

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