London-based Funding Circle will apply for £30m of the government’s Business Finance Partnership investment funds of £500m.

Here is the press release:

LONDON – May 31 2012 – London-based Funding Circle will apply for a slice of the £100m the government is planning to invest in small businesses through alternative lenders.

The peer-to-peer lender will apply for about £30m of the government’s money, although it is ready to handle a greater amount of funding.

The government’s Business Finance Partnership will make £500m available to SMEs and alternative lenders such as Funding Circle are expected to be at the heart of the plans.

Funding Circle spokesman David de Koning said: “We will review the documents from BIS (Department for Business, Innovation and Skills) today, when I think they are going live, and work out what is best.

“We believe that £30m is absolutely a sum they could lend through us. They could be lending that money in days.

“If they wanted to do more then we have the mechanism in place to deal with that level.”

Funding Circle allows individuals to offer funding to small businesses at a rate they can set.

The government could have an investor account set up with an auto-bid function, so it would invest alongside individuals at whatever the market rate is.

Money could then be returned to the government at the market value, with an average investor growth yield of 8.5 per cent to date.

The amount the government could loan to individual businesses would be limited by state aid rules. Funding Circle said it would ensure the government provided “no more than 20 per cent to 33 per cent” of a company’s loan.

De Koning said: “There is the opportunity to help hundreds and hundreds of businesses over the next year or so, thousands maybe, and they are doing it alongside the British people which is a really good message.”

Funding Circle has so far been used to deliver nearly £34m of loans to small businesses, so if its application for £30m or more of government money was successful then it would be a major boost for the business.

“It’s absolutely a vote of confidence in the business model and it is great to see the government is finally recognising the need for greater competition and new ways for business to access credit.”

He continued: “I think if the government is coming on board and working in partnership with us then it’s great for our business and also for investors that they can lend alongside the government to help drive economic growth.

“It would be great for Funding Circle, we are expanding at the moment anyway. We have 26 staff and we expect to have 40 by the end of the year.”