Funding Circle, which like other peer-to-peer lenders allows investors to lend to businesses via low-cost online platforms, said its SME Income Fund would focus on lending to companies in Britain and the United States.
Funding Circle plans to list it on the London Stock Exchange once it is launched, becoming the first peer-to-peer platform to float its own fund. The fund is targeting a dividend yield of 6-7 per cent a year.
Samir Desai, chief executive of Funding Circle, said: “This will be the first fund to exclusively lend to small businesses through the Funding Circle marketplaces, and is a response to the huge demand we’re seeing from a wide range of investors for small business loans.
“Today marks an important step on our journey to creating a global marketplace where any investor, big or small, can lend to small businesses across the world.”
Peer-to-peer lending has grown rapidly in Britain since the 2007-9 financial crisis, providing an alternative source of finance for small firms as banks cut back on lending to strengthen their balance sheets and meet regulatory demands.
The platforms also allow retail investors to achieve greater returns at a time when benchmark interest rates are at record lows.
To date, investors have lent about £71m to 1,229 businesses in Yorkshire via Funding Circle with an average loan size of £57,000. Funding Circle is backed by venture capitalists.