UK startup Funding Circle has received £40m from the state-owned British Business Bank (BBB)on the condition that the funds be used to lend to small businesses, according to a report from news website Business Insider.
Funding Circle, a P2P lender, has now received £100m from the BBB, following a £60m investment back in 2013. According to the BBB, the money has been distributed to more than 10,000 UK businesses and earned the bank around £5m in net interest.
"Peer-to-peer lending is becoming an increasingly important source of finance for smaller businesses, with AltFi data showing an 85% increase in lending via the sector from 2014 to 2015," said BBB's chief executive Catherine Lewis La Torre in a statement to Business Insider.
"A key part of our remit is to support the development and growth of such finance markets, while earning an attractive, commercial return for the taxpayer. We look forward to seeing our latest commitment to Funding Circle enabling the growth and success of many more businesses across the UK."
The BBB was established in 2012 with £1bn of funding and the express mission to provide extra credit for small businesses. The £40m provided to Funding Circle will be ringfenced for lending and will not be invested directly in the P2P lender.
The BBB has also used other P2P lending platforms to provide funds for small businesses - namely RateSetter and MarketInvoice.
Despite the returns that the BBB has accrued through its transactions with the P2P lending platforms, the practice has gained some criticism. Business Insider quotes the chief executive of lobby group Taxpayers Alliance who says the practice is "extemely concerning", in light of the fact that the Financial Conduct Authority has voiced its own concerns about the fledgling P2P industry.
In December it announced its intentions to apply more stringent regulation to the sector.