Small businesses are being offered new funding of £55m, which when added to matched-funding from the private sector means that £110m of new money will be available to help firms develop in the coming years.
Four business development and peer-to-peer lenders – Funding Circle; Zopa; Boost & Co, and Credit Asset Management – will receive between £5m and £20m to provide loans to SMEs as part of the government’s Business Finance Partnership Scheme.
Business secretary Vince Cable said that small and medium sized businesses needed access to a diverse range of finance options, including non-bank lending.
"These new forms of finance are still small in scale today but they should, over time, bring additional choice and greater competition to the lending market.
“Today’s funding announcement is just the type of help that the new Business Bank will offer. The bank, which will be operational by 2014, is being designed to tackle these long-standing, structural gaps in the supply of finance for SMEs.”
Cable said the Business Finance Partnership was a £100m fund and that the government expects to announce the allocation of the remaining £45m in the New Year, once due diligence is completed on the remaining bids still being considered.
Firms looking to borrow money under the scheme should contact the four lending entities directly, the government said.