British Business Bank to lend to SMEs through Ratesetter

Friday 11 December 2015

One of the first obstacles many small to medium-sized enterprises (SMEs) face is finding funding. It can be difficult to get your new business off the ground if you can't secure the money needed to launch it, and some financial institutions are reluctant to lend to small traders as they see them as a larger risk.

uckily, this is not the approach taken by every organisation, and more and more companies are seeing the advantages of lending to small businesses. One of these is the British Business Bank, which brings government funding and expertise to help the small business finance markets work more effectively. Its commercial arm British Business Bank Investments Limited has recently announced that it is to expand its partnership with Ratesetter to SME funding.

Ratesetter is a peer-to-peer (P2P) service which was founded in 2010. In just five years of existence it has provided around £830 million worth of loans to both organisations and individuals, roughly £8 million of which has come from British Business Bank Investments (BBBI), the bank's commercial arm.

In fact, over the last year the amount lent to small businesses has risen by 60 per cent, and Ratesetter currently has £137 million of outstanding business loans according to Rhydian Lewis, the platform's CEO. Mr Lewis added: "Our book of loans to SMEs is growing strongly.

"We are very pleased that our partnership with British Business Bank Investments Ltd has delivered finance for almost 1,000 creditworthy sole traders across the UK, and it is great news that this will now be extended to small businesses."

When BBBI lends through Ratesetter, it does so at the same rates as any other investment. It says this is intended "to encourage lending to the real economy", while also aiming to promote alternative lending methods such as the P2P lending promoted by Ratesetter.

The platform works on a P2P model, which means both borrowers and investors can use it. Essentially, BBBI - or any other investor - lends money to Ratesetter, which the platform can then lend out to borrowers. This improves access to loans for small businesses, as lenders know that Ratesetter is a safe investment so have none of the worries that they might have lending to a sole trader.
The fact that the platform is backed by the British Business Bank is very encouraging for the UK's SMEs and sole traders. It shows that start-ups and small businesses don't need to rely on gaining funding from banks and other major financial institutions, as alternative means of obtaining finance are growing in number and influence.

By Victoria McDonnell

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