Santander UK has struck a partnership with an alternative finance company to fund social enterprises in a deal that marks the first tie-up between a large British high-street bank and an equity crowdfunding site.
The bank is joining forces with Crowdfunder to provide £200,000 to community projects, charities and enterprises that are focused on social change across the UK.
Santander will donate half the funding target of a project once it raises 50 per cent from the public online.
The partnership further closes the gap between mainstream and alternative finance, and paves the way for closer collaboration between high-street lenders and the crowdfunding sector.
The deal is the latest in a series of tie-ups that Santander has forged in the alternative finance and “fintech” space.
The bank partnered with Funding Circle in 2014, to refer small business customers seeking loans to the peer-to-peer lender when the bank was unable to serve them.
The deal with Crowdfunder is different from peer-to-peer platforms, which enable people to lend in return for interest. Equity crowdfunding raises money from the public who each gain a share in the company.
In the case of Crowdfunder, investors can take a stake in a local project to gain a vote on how it is run, and might gain a small return, while Santander’s funding is a donation.
Phil Geraghty, managing director of Crowdfunder, said the partnership “offers long-term economic impacts by supporting social enterprises alongside the immediate benefits of helping people make their great ideas happen”.
The move by Santander to tie up with alternative finance platforms is part of a broader strategy to grow its SME business. The bank has entered talks with Royal Bank of Scotland over acquiring Williams & Glyn, the small business and retail-focused bank that RBS must divest as a condition of receiving a state bailout of £45bn in 2008.
Sue Douthwaite, managing director of Santander Business Banking, said: “Our purpose is to help people and businesses prosper and we recognise the important role social enterprises and charities play in helping communities to thrive.
“With the power of the crowd, our £200,000 Changemaker Fund will help bring great ideas to life and enable social enterprises and community ventures to grow.”
Partnering with alternative finance platforms provides Santander with nimble technology to offer superior services to small business.
Earlier this year, Santander tied up with US online lender Kabbage, as a way to provide funding to small businesses in a matter of hours. Kabbage, in which Santander invests through its fintech venture capital fund, speeds up the underwriting process so businesses can potentially access working capital of up to £100,000 online on the same day.