European Investment Bank announces £100m small business funding scheme

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Small businesses in the UK could gain easier access to valuable loans thanks to a new £100 million scheme announced by the European Investment Bank.

The money will be invested in loans to UK small businesses originated through business loan marketplace Funding Circle. It represents the first deployment of funding from the bank through a direct lending marketplace to support small businesses.

In addition to the £25 million allocated via the Funding Circle SME Income Fund, the investment will allow more than £200 million of new loans to be paid out over seven years. Funding Circle has facilitated more than £1.25 billion of loans to 16,000 businesses in the UK since launching in 2010.

Currently, there are more than 5.4 million small businesses in the UK, accounting for 99.3 per cent of all private sector business. Collectively, they account for 50 per cent of GDP and 60 per cent of the country's employment, which is why the European Investment Bank is keen to provide greater support to these value-generating organisations.

Over the last decade, the bank has provided more than £3 billion for investment by small businesses across the UK.

Jonathan Taylor, vice-president of the European Investment Bank, said: "The £100 million backing will not only unlock over £200 million of new investment by small businesses across the UK, but also provides an innovative model for supporting SMEs that could be used elsewhere in Europe."

Marketplace lending is increasingly being seen as an efficient way for smaller companies to access finance, meaning it represents an important channel through which to stimulate economic growth.

Accordingly, Funding Circle has received both national and local government backing, as well as support from international organisations such as the European Investment Fund and the German development bank KfW.