The government has announced plans to lend to small businesses through peer to peer lenders.

For example, it plans to lend £20 million to growing businesses through Funding Circle and £10 million through Zopa.

Laura McMullen, business development director at Funding Circle, said: “Not only is this a huge vote of confidence for peer-to-peer lending, it’s a defining moment for the future of small business finance.

“For too long, British firms have been held back by a banking monopoly, with businesses across the UK struggling to get the finance they need. Today is an important milestone in redrawing the financial landscape to give them a brighter future.

“Thousands of people are already supporting British businesses in this way and are reaping the rewards. The Government will able to boost their efforts on a substantial scale by injecting money directly into the bloodstream of Britain’s businesses and driving economic recovery.”

Giles Andrews, co-founder and CEO of Zopa, added: “We are delighted to be included in this scheme and very pleased that the Government has recognised that there are alternatives to the traditional financial institutions that work. We hope that the additional money being lent through Zopa will help thousands of sole traders to further their business and help build the economy.

“With over 3.5 million sole traders in the UK at the moment, one of the backbones of the economy, it is a vital sector that has felt the effects of the banks’ reluctance to lend money.”