Funding Circle, the peer-to-peer lending site for small businesses in the UK, has raised £2.5m in a Series A round led by Index Ventures. Unnamed co-investors as well as existing shareholders have also participated, while Neil Rimer, co-founder and Partner of Index will take a seat on the Board. Before today’s round, the London-based company was Angel funded to the tune of $1.1m from private investors.
A sort of Zopa-for-SMEs, the ‘social lending platform’ facilitates loans to small-to-medium-sized businesses instead of individuals, giving lenders the opportunity to get an average 8.3 per cent return on their money. It’s also possible for lenders to get their money back before a loan is repaid by reselling their part of the loan onto other lenders, which is somewhat unique to the platform. And with nearly 90 per cent of lending to small businesses in the UK coming from only four banks, the market would seem ripe for disruption.
To that end, since its launch in August last year, more than 4,000 businesses and savers have signed up to Funding Circle, with £11.5m offered to businesses to-date. So far lenders have collectively earned £120,000 in interest, while no borrowers have yet to default. As for how Funding Circle generates revenue, it receives a 1% fee from lenders and 2% fee from borrowers.
Funding Circle is co-founded by Samir Desai (formerly of Olivant & the Boston Consulting Group), James Meekings (formerly of OC&C Strategy Consultants) and Andrew Mullinger (formerly of Citigroup, Ernst & Young and Nomura).