A new way to bypass the banks

For all the nagging by politicians, banks still aren't lending to small firms. Now, a new social lender is offering the chance to get returns of up to 9% a year by lending your cash direct to small firms. Tim Bennett explains how it works.

For all the nagging by politicians, banks still aren't lending to small firms. Business lending shrunk for the fifth month in a row in July, according to the Bank of England. Meanwhile, the pitiful rates paid on savings accounts mean that savers are still seeing inflation eat away at their cash.

EnterFunding Circle. This new social (or 'peer-to-peer') lender is offering the chance to get returns of up to 9% a year by lending your cash direct to small firms. The idea isn't new. Zopa has been providing a similar online service since 2005. Both lenders offer the chance to bypass the banks and lend your money direct Funding Circle to businesses, Zopa to people. But as Dan Hyde notes on Thisismoney.co.uk, Funding Circle "comes with a unique twist": you can get your money back when you like.

Subscribe to MoneyWeek

Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Get 6 issues free
https://cdn.mos.cms.futurecdn.net/flexiimages/mw70aro6gl1676370748.jpg

Sign up to Money Morning

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Sign up

Tim graduated with a history degree from Cambridge University in 1989 and, after a year of travelling, joined the financial services firm Ernst and Young in 1990, qualifying as a chartered accountant in 1994.

He then moved into financial markets training, designing and running a variety of courses at graduate level and beyond for a range of organisations including the Securities and Investment Institute and UBS. He joined MoneyWeek in 2007.