Funding Circle, an ‘online marketplace’ to facilitate lending to businesses, has attracted backing from Jon Moulton, founder of AIM-listed investment vehicle Better Capital, and Andy Homer, the chief executive of insurance group Towergate.

Private investors, either individually or in groups, can use the platform to make loans of between £5,000 and £50,000 to small businesses. Interest rates are expected to be between 6 and 9 per cent.

Moulton, who has invested an undisclosed amount in the company, comments, ‘There is no doubting that Funding Circle offers a new, high-interest asset class with an excellent level of risk-adjusted return. This is particularly attractive for people disappointed with the low rate of return on bank deposits.’

Other investors in Funding Circle include Yasmina Siadatan, winner of TV show The Apprentice last year.

Laurie Edmans, Funding Circle’s chairman, says the initiative was launched in response to the difficulty and expense incurred by businesses in attracting funding from banks.

He adds, ‘Small businesses are currently being charged an average of 11 to 12 per cent interest on unsecured loans by banks. Many are even paying as much as 18 per cent. These interest rates, combined with additional high arrangement fees and burdensome application processes and redemption penalties, are discouraging businesses from borrowing money.’

Funding Circle will levy a ‘one-off charge’ on borrowers of 2 per cent of the loan.