A new pilot scheme aimed at becoming a ‘potential blueprint’ for small business lending in the public sector is being conducted by Lancashire County Council.

The local authority is set to begin using peer-to-peer lending platform Funding Circle, with £100,000 of investment capital available over five years.

Funding Circle works by allowing consumers to use savings as a way of providing loans to businesses.

Lancashire County Council says the scheme will help realise the growth potential of local businesses which are being ‘stifled’ by poor access to finance.

It believes that the partnerships could grow to a multi-million pound commitment over the next five years.

County councillor Michael Green, who is a cabinet member with responsibility for economic development, says that the move is a ‘ground-breaking’ new way to fund business growth.

‘This approach to business funding has proved popular in other parts of the country and across the globe,’ he adds.

‘It’s directly supported growing businesses and created new jobs. Lancashire County Council is determined to show that the country is open for business.’

The council authority says its 52,000 small businesses are responsible for more than 50 per cent of local private sector employment. As part of the process, Lancashire council will fund approximately 20 per cent of a loan to a local business.

James Meekings, co-founder of Funding Circle, comments, ‘Lancashire County Council is leading the way for other local authorities to follow, injecting finance right into the heart of the local business community.

‘In today’s economy, businesses want to access finance quickly with minimal disruption. This new partnership will free local businesses from the shackles of the high street banks so that they can continue to grow and fulfill their potential.’