Earlier this month, Santander has announced that they will refer their customers to P2P Lender, Funding Circle. In turn,  will promote Santander’s financial services, promoting current account and cash management services offered by the high-street bank. Through this referral programme, businesses serviced by Santander will be referred to the P2P lender, where appropriate, for loans that would be better suited to alternative finance. 

This partnership comes in the wake the coalition government’s consultation on ‘forced’ referrals from Banks to Alternative Finance providers. With the consultation period over and a government decision is in the works for publications later this summer, the deal with Santander and Funding Circle has shown that a government candidate is not necessarily required for cooperation amongst alternative and traditional finance providers.  CEO and Co-founder of Funding circle said “This partnership recognises our role as the only marketplace that caters for, and is dedicated to, small businesses. In Santander we have found a fellow challenger brand that shares our commitment to putting small business customers’ needs first. They have created a blueprint for other banks to follow.”

When speaking with Funding Cirlce about this partnership, explained that this partnership will engender further mutual understanding between traditional and alternative lenders but will not change the way Funding Circle evaluates potential businesses. “[The Bank] will better understand how we are able to help small businesses and be more inclined to refer customers who they can't help. Obviously this wouldn't affect our credit assessment criteria or underwriting practices, but should help significantly with awareness, which remains fairly low amongst the business community.” As such, Funding Circle will continue to conduct its own evaluation on a case by case basis for SMEs wishing to raise funds. 

Obviously, this partnership brings a clear advantage with respect to enhanced deal flow for Funding Circle. However, Funding Circle explains that it is there hope that many more banks begin working with other alternative platforms, to further raise awareness of the industry and service UK businesses in a robust manner. “This isn't an exclusive partnership and we actually hope that this will be the first of many announcements, and that all banks will begin to work more closely with alternative finance providers in the best interests of customers.” This is certainly good news for other alternative funding providers, especially for those who have already taken measures to help raise awareness to SMEs. The website, which began earlier this year, serves as a traffic light system to help businesses select an appropriate financial services via an alternative platform. Funding Circle is a member of this website. 


With the success of this partnership, a positive endorsement for referral systems between banks and alternative finance providers is clear. Through a formal arrangement like the one above, and with the potential advent of a government mandated referral system, alternative funding is becoming more mainstream and accessible to businesses in need of finance.

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