East Mids firms to partake in "eBay business loan" scheme
East Midlands businesses are being to get involved with a scheme which describes itself as “eBay for business loans”. Ten private investors have joined forces with a venture capital fund manager to create the Business Loan Network (BLN), through which businesses can borrow between £50,000 and £3m.
The investment scheme provides businesses in the region with a lower cost alternative to borrowing from a high street bank.
BLN is an online auction process which gives investors the chance to earn between 7 and 12 per cent return on their investment.
It has been developed as an “eBay for business loans”, set up by the unnamed investors to “cut out the fat cats”.
The online auction process provides pre-vetted and secured business lending opportunities to experienced investors. The first deal has already been completed, and three more auctions are now in progress.
Companies can borrow between £50,000 and £3m and lenders can bid as little as £1,000 or as much as the whole loan. At the end of the auction, the lowest interest rates bid are selected to make up a syndicate.
Kevin Caley, managing mirector of the Business Loan Network, said: “For many years there has been an ‘equity gap’ for smaller businesses, but now the ‘credit crunch’ has created a much more serious ‘loan gap’ - banks are simply not offering the amount of funding that businesses need and, when they do lend, the interest rates are unrealistically high as they try to strengthen their own balance sheets.
“At the same time, savers cannot get an attractive level of interest on money kept in their bank account.”
The first loan completed was with Warwick-based Bell Finance, a specialist in asset finance, hire purchase and finance leasing.
The company successfully secured £75,000 at a rate of 8.5 per cent from BLN. The investment will be used to “expand its portfolio of activity”, said the company.
A further three firms are currently at auction with another two in the pipeline.
