Consumers lend £1m to businesses

Consumers have lent £1m to businesses just 10 weeks after a new online lending platform was launched. More than 1,600 people have used Funding Circle, a social lending platform that enables individuals to lend directly to businesses, since it was launched in August.

By The Newsroom

Published 5th Nov 2010, 18:59 BST

Updated 5th Nov 2010, 18:59 BST

The group said the success of the site highlighted both consumers' desire to earn higher interest on their money and pent up demand for finance from small businesses. The typical investor lends 2,000 through the site, earning average annual interest of 8.2 per cent on their money.

Unlike with most social lending sites, people can also get their money back before the end of the loan's term through selling on parts of their loan to other lenders.

Each person provides only a fraction of the overall loan that a business requires, with the credit worthiness of each firm assessed by underwriters at Funding Circle.

Companies are split into different risk bands to give potential lenders a clear indication of the level of risk they pose, although so far all firms have fully repaid their debt on time. Consumers set the level of interest they want to charge themselves, with businesses accepting the lowest offers.