UK govt to put funds in alternative business lending

LONDON (Reuters) - The British government plans to pump 100 million pounds ($155.3 million) through alternative lending platforms such as peer-to-peer lending as part of its efforts to boost funding for small businesses.

With small businesses struggling for funding as banks, facing higher capital requirements, rein in lending, the government has been seeking to get much-needed cash flowing to help promote investment and job creation.

On Thursday the Department for Business, Innovation and Skills (BIS) said it had begun seeking proposals for how to allocate the money, part of the government's broader 1.2 billion pound Business Finance Partnership scheme to help improve the flow of credit to businesses.

It said it would focus on non-traditional funding channels such as peer-to-peer platforms, supply chain finance and mezzanine finance that can reach companies with an annual turnover of less than 75 million pounds.

"As businesses are continuing to struggle to get credit from their banks, developing alternative lending channels so firms are less reliant on banks is essential," Business Secretary Vince Cable said in a statement.

"Our aim is to create a more diverse financial infrastructure which better serves the needs of our small and medium-sized companies."

Under the scheme, the government will provide up to 50 percent of an investment, with the remaining 50 percent to be provided by private sector investments.

In March a government-commissioned taskforce looking to boost non-bank funding said direct government support could help support the growth of alternatives such as peer-to-peer lending platforms like Funding Circle, a website which allows people to lend directly to small firms in the UK.

Market Invoice, a website which allows small companies to raise working capital by auctioning their invoices, said it would be applying for a total of 30 million pounds of the funding. ($1 = 0.6438 British pounds)

(Reporting by Kylie MacLellan; Editing by Jon Loades-Carter)