The European Investment Bank (EIB) is lending €100 million through Funding Circle, a leading global platform for small business loans. This investment, alongside a further €25 million from a leading international asset manager, will support over 1,600 small businesses in Germany and the Netherlands over the next two years and provide a further injection of much-needed funding into the European small business sector. The EU bank's loan is backed by a guarantee from the European Fund for Strategic Investments (EFSI), the heart of the Investment Plan for Europe – the Juncker Plan – under which the EIB and the European Commission are working together as strategic partners and the EIB's financing operations are boosting the competitiveness of the European economy.
Today's transaction builds on the successful existing partnership between Funding Circle and the EIB in the UK. Since 2016 the EIB has lent £100 million (€120 million) to UK small businesses. Online lending platforms play an increasingly important role in channelling finance directly through to small businesses, whilst also operating as an important new channel for governments and supranational entities to directly stimulate the real economy.
EIB Vice-President Ambroise Fayolle, who is responsible for operations in Germany and EFSI at the Bank, said: "SMEs are important drivers of growth, employment and innovation in Europe; they represent over 90% of businesses and employ two-thirds of the active working population. The EU bank seeks to ensure better access to finance for SMEs at all stages of development through a range of tailored instruments. It also focuses on partnerships that facilitate access to finance for SMEs in a bid to boost innovation, competitiveness and employment opportunities. Therefore I welcome very much our very close and constructive cooperation with Funding Circle."
European Commission Vice-President Jyrki Katainen, responsible for Jobs, Growth, Investment and Competitiveness said: "Small businesses play a crucial role in the EU economy. Facilitating access to the finance they need to create jobs, innovate and grow is a key priority of the Investment Plan. Today's agreement with Funding Circle will enable 1,600 small businesses in Germany and the Netherlands to receive such a financing boost: this is another example of how the EU works to give every small business the means to succeed."
Sachin Patel, Chief Capital Officer at Funding Circle, said: "Funding Circle's direct lending platform is a highly efficient way for supranational banks to give small businesses access to much-needed finance. This groundbreaking investment in German and Dutch small business loans by the EIB builds on the success of our existing partnership in the UK. We are proud to continue expanding our support for German and Dutch businesses."
Panni Morshedi/Jeroen Broekema, Managing Director Continental Europe/Netherlands at Funding Circle said: "We are very happy about today's announcement. This is the first time the EIB is investing in small business loans through Funding Circle in continental Europe and fantastic news for German/Dutch small businesses. By making finance more accessible we help small businesses across Europe grow and hire more staff. The EIB financing will help create and sustain around 2,500 jobs in Germany and The Netherlands."
Small and medium-sized enterprises (SMEs) continue to be underserved across Europe when it comes to access to finance, despite their significant contribution to the economy. Albeit ongoing efforts on the EU-level, a recent survey by the European Commission found that 18% of the European SMEs did not manage to get the full bank loan they had planned for during 2018.
To date, Funding Circle has facilitated more than €7.5 billion of loans to 60,000 businesses globally. Across Europe, 50,000 businesses have accessed about €5.5 billion in finance to date. Since launching in 2010, lending to small businesses through Funding Circle has evolved to include a diverse range of investors. This includes national and local government backing such as the British Business Bank in the UK and, and the German development bank KfW, as well as international organisations such as the European Investment Bank and European Investment Fund.
By linking supply directly with demand through the marketplace, Funding Circle diversifies the sources of funding available to small businesses and supports economic growth and job creation in local communities.
In Germany, Funding Circle has facilitated more than €210 million in small business loans since 2015, €100 million in 2018 alone. The platform supports small businesses from all over Germany with finance, creating and sustaining 1,700 jobs in 2017.
In the Netherlands, Funding Circle has facilitated more than €140 million in small business loans since 2015, €81.2 million in 2018 alone. The platform supports small businesses from all over the Netherlands with finance, creating and sustaining 900 jobs in 2017.
Launched in 2010, Funding Circle is transforming the way small businesses access finance globally, disrupting the traditional bank loan for businesses. The platform model enables institutional investors to access the SME lending asset class in an efficient and scalable way. The EIB joins a diverse group of investors lending to small businesses through Funding Circle, such as more than 85,000 retail investors, banks, asset management companies, insurance companies, government-backed entities and funds.