8.4 Peer-to-peer lending

Funding Circle is an established peer-to-peer platform with tens of thousands of investors as well as local government, universities and others looking to lend to British businesses. The Government-owned British Business Bank has also pledged to lend £40m via this platform to investors (Funding Circle, 2017).

Peer-to-peer lending provides a viable alternative to traditional funders, as you can apply for loans up to £1 million in the case of Funding Circle and £3 million for Thincats, repayable over terms of up to five years. Many platforms only lend to creditworthy borrowers, making those a much safer bet for investors. Investors don’t own shares; instead, the reward is the interest that is paid on the loan.

Peer-to-peer lending has been tax free in the UK since April 2016. Tax benefits around equity-based crowdfunding are more complex but still attractive. Find out more about the government’s EIS and SEIS schemes for prospective lenders seeking tax relief on their investments in the Further reading section at the end of this week.