Funding Circle launches £150 million float of SME fund

London-based Funding Circle has become the first peer-to-peer lender to tap public markets as it announced the float of a fund to raise £150 million.

Led by Goldman Sachs, the Funding Circle SME Income Fund is targeting 8-9% returns per year, with a dividend yield of 6-7%.

Investors will be able to put the fund into ISAs, meaning investing in the platform will become tax-free for the first time.

The company, one of the stars of the capital’s budding fintech scene, hopes to raise the cash on the London Stock Exchange, to be invested in small businesses in the UK and the US which use its lending platform.

Lower overheads mean start-ups such as Funding Circle can afford to offer small businesses better rates than the high-street banks.

Founder and chief executive Samir Desai said the launch of the fund was a response to “huge demand” from investors for small business loans.