The online lender Funding Circle is partnering with a network of more than 325 community banks to enable participating lenders to purchase interests in the digital platform’s small-business loans.
The partnership will be open to banks that are members of the BancAlliance network, and will provide an “efficient and cost-effective way” for local and regional banks to “invest capital in Main Street businesses,” according to a statement from the two companies.
“Community banks have long been powerful supporters of small businesses,” Lori Bettinger, BancAlliance’s president, said in the statement. Working with Funding Circle underscores the network’s “commitment to expanding access to working capital to small businesses,” she said.
A spokesperson for BancAlliance and Funding Circle did not respond to an interview request.
Chris King, president of the ATM division at ICI Consulting, a banking and credit union advisory firm, said that Funding Circle’s “streamlined” lending to small businesses will provide community banks “a little bit more leniency to make loans to individual businesses.”
Funding Circle “is looking at how to get around some of the requirements that banking institutions have to undergo,” King said. “They’re charging a higher interest rate to be able to offset taking some risks.”
BancAlliance was founded in 2011 by the investment firm Alliance Partners and its parent company Forbright Bank. The network helps facilitate underwriting and loan approval between community banks and small businesses in need of financing. BancAlliance says it has helped originate over 350 loans totaling around $4 billion.
In 2015, BancAlliance
Funding Circle, which also operates in the U.K., launched 12 years ago to provide investors access to small and medium-sized enterprise lending opportunities. Lenders that have used its platform have supplied around $18 billion in loans to 120,000 businesses around the world, according to the company.
