The scheme aims to stimulate local economic growth and employment through improved access to business finance.
As part of the partnership, the council will lend an initial £100,000 to Lancashire-based businesses using Funding Circle.
The pilot scheme will help realise the growth potential of local businesses that are currently being stifled by poor access to finance, and could become a blueprint for the future of small enterprise lending across the UK.
It is also anticipated that the partnership could grow to a multi-million pound commitment over the next five years, reports Bridging and Commercial.
Lancashire County Council has become one of a recent crop of local authorities looking to reinvest money into local properties and businesses.
Most recently, Cardiff City Council launched a £1 million loan scheme to fund its Houses into Homes schemes, which offered landlords interest-free loans to improve empty properties so that they could be sold or rented.
Speaking about the Lancashire scheme, James Meekings, co-founder of Funding Circle, said: “This revolutionary partnership will deliver much needed finance to growing businesses in Lancashire, in turn creating jobs and boosting the local economy. Lancashire County Council is leading the way for other local authorities to follow, injecting finance right into the heart of the local business community.”
James added: “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 fulfil their potential.”
The partnership with Funding Circle has been arranged by the county council through its economic development department, Lancashire County Developments Limited (LCDL).
County Councillor Michael Green, cabinet member with responsibility for economic development, said: “This is a ground-breaking, new way to fund business growth and is a first for any council in the UK.
“The partnership with Funding Circle is just one of the ways in which we’re supporting economic development in the county, alongside established programmes such as Rosebud. There is great potential to grow the Lancashire economy in the future. Working with Funding Circle, our aim is to unlock more of this potential.”
The partnership will provide important support for businesses in the local region to expand and employ additional members of staff. As part of the partnership, Lancashire Council will fund approximately 20 per cent of a loan to a local business.
Lancashire’s 52,000 small businesses are responsible for more than 50 per cent of local private sector employment. A recent study by Funding Circle indicated the potential economic boost that could be unlocked through better access to finance and 42 per cent of small businesses in the North West stated that they would increase staff numbers if they could obtain finance.
By contrast, according to figures from the British Bankers Association, loan facilities in the region fell by 30 per cent between Q1 and Q2 of this year.
