Temasek Snaps Up Stake In UK's Funding Circle

A fast-growing peer-to-peer lending platform is to sell a stake in itself to Temasek, the Singaporean sovereign wealth fund, as part of a fundraising that will catapult it into the ranks of Britain's most valuable technology start-ups.

Sky News can exclusively reveal that Funding Circle is in advanced talks with Temasek Holdings about plans to raise well over £50m in new capital to accelerate its expansion.

Temasek, which has invested in some of the world's most valuable technology companies, including China's Alibaba, plans to invest roughly £30m as part of the deal, sources said on Thursday.

An arm of Blackrock, the world's biggest money manager, and Baillie Gifford, the Edinburgh-based asset management group, are also expected to participate in the deal, which will value Funding Circle at in excess of $1bn (£675m).

The funding round, which is likely to close within weeks, will cement Funding Circle's status as one of the UK financial technology, or fintech, sector's most exciting prospects.

Funding Circle's existing investors include funds such as Index Ventures, Accel, Union Square Ventures and Ribbit Capital.

They each stand to make substantial gains on the value of their holdings in the company, which was founded less than five years ago.

Funding Circle, which is also backed by the Carphone Warehouse co-founder Sir Charles Dunstone, describes its mission as being to "revolutionize the outdated banking system and secure a better deal for everyone".

Since opening for business, it has lent close to £600m and counts more than 30,000 individuals, the UK Government and local councils among those providing capital through the platform.

Pressure from the Government on banks to refer borrowers to peer-to-peer lenders when their loan applications are rejected by high street stalwarts is fuelling a rapidf growth in demand in the sector.

"Too much business lending is concentrated in the big banks,” Vince Cable, the Business Secretary, said last year.

"If we’re to have a properly functioning business lending market, they need to be challenged by new banks, peer-to-peer lenders and other alternative providers."

Last year, Funding Circle announced an agreement with Santander UK to refer small business borrowers to the tech company.

Samir Desai, the peer-to-peer lender's chief executive, said:

"This partnership recognises our role as the only marketplace that caters for, and is dedicated to, small businesses. In Santander we have found a fellow challenger brand that shares our commitment to putting small business customers’ needs first. They have created a blueprint for other banks to follow."

Since then, other banks have struck similar deals with Funding Circle and its competitors, which offer higher interest rates than high street banks because of their lower fixed-cost bases.

Investors' enthusiasm for the peer-to-peer lending industry has also been fired by the successful initial public offering of Lending Club, the world's biggest peer-to-peer platform.

Funding Circle and Temasek declined to comment on Thursday.