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Government backs alternative business lenders with £55 million

Small and medium sized businesses and sole traders are to benefit from £55 million of Government funding being channelled through non-bank lenders.

The Business Finance Partnership (BFP) hopes to end the monopoly of traditional high-street banks, by diversifying and boosting the supply of finance to SMEs through alternative sources such as peer-to-peer lenders.

A further £55 million is expected from private-sector match-funding, making a total of £110 million available to small businesses over the next few years.

The Government confirmed that Funding Circle, Zopa, BOOST&CO and Credit Asset Management Limited were the first four successful BFP bidders, receiving £20 million, £10 million, £20 million and £5 million worth of funds respectively.

Business secretary Vince Cable said: "Small and medium sized businesses need access to a diverse range of finance options, including non-bank lending. These new forms of finance are still small in scale today but they should, over time, bring additional choice and greater competition to the lending market."

The Government will make a total of £1.2 billion available to the BFP, with £100 million specifically allocated to small businesses. The remaining £1.1 billion will be allocated by the Treasury and target businesses of all sizes.

Vince Cable also announced that the new Business Bank - designed to 'tackle long standing structural gaps in the supply of finance for SMEs' - would use the BFP lending style when it becomes fully operational in 2014.

A network of 1,000 business finance advisors will also be launched to help small businesses identify and obtain the most appropriate types of finance.