February 4, 2013 10:56 pm

University starts lending to fund students

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A British university is to lend to small businesses to generate funds for bursaries in the latest effort to bypass banks to boost the economy.

The University of Huddersfield, West Yorkshire, is to lend £100,000 via Funding Circle, the peer-to-peer lender, with the earnings spent on scholarships for up to 500 disadvantaged students over the next five years to study enterprise.

James Meekings, co-founder of Funding Circle, said it would be the first of many such partnerships with universities.

“They have money to invest. They can help business and make a return and also help to educate the next generation of business leaders. It is a virtuous circle. It improves the business ecosystem.”

Bob Cryan, vice-chancellor of the university, said: “This partnership represents the University of Huddersfield’s commitment to the future of British business. Together we will support entrepreneurs active in today’s business world while at the same time helping young business people develop the right knowledge and skills for the future.”

Funding Circle, which will become regulated from 2014 when the government draws up new rules, has sought to expand by teaming up with sources of cash who can attract businesses to its online platform.

In November Lancashire County Council became the first local authority to use Funding Circle, making £100,000 available to local businesses. The government plans to lend £20m through it.

The partnership will provide businesses with access to Huddersfield’s research facilities, including its recently opened £12m 3M Buckley Innovation Centre while offering students seminars and internships.

Theo Paphitis, the Dragon’s Den panellist and owner of retail chains Ryman and Robert Dyas, who is involved with the university’s Enterprise Development degree, said it was a “pioneering step”.

Funding Circle, backed by Jon Moulton, the venture capitalist, and Charles Dunstone, the Carphone Warehouse founder, among others, has brokered £70m of lending by individuals to more than 1,000 small businesses since it was founded in August 2010.

Businesses must have been active for two years but the average borrowing company is 11 years old. They can borrow between £5,000 and £500,000 over one to five years.

Mr Meekings said it lent a record £8m in December, up from £1m a month when it started. He said small businesses were increasingly bypassing banks because of their short opening hours, bureaucracy and request for guarantees and other collateral.

“Peer-to-peer lending will become mainstream,” he said.

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