Funding Circle and Santander UK have launched the first partnership between a UK bank and an online alternative finance provider to give thousands of small British businesses greater access to finance.

The referral arrangement will see Santander proactively refer small business customers looking for a loan to Funding Circle, the online marketplace for business loans. Where Funding Circle is better placed to help, referrals will take place on Santander’s website and in letters to customers.

To date Funding Circle has helped more than 5,000 businesses borrow £290m through its marketplace, and investors earn an average of 6.1% after fees and losses. As part of the relationship, Funding Circle will signpost its customers to Santander where they require day-to-day relationship banking support or other services that the bank can offer such as international banking, cash management and support for growth.

Ana Botin, CEO of Santander UK, said: “SMEs need access to multiple sources of finance, and Santander’s partnership with Funding Circle is a good example of how traditional and alternative finance can work together to help the nation’s SMEs prosper. Peer-to-peer financing is also a useful way to introduce people to the concept of investing in entrepreneurs; an important element in a healthy enterprise economy.”

The partnership comes at a time when the government is consulting on whether it should be mandatory for banks to refer small businesses to other non-bank providers.

Samir Desai, CEO and co-founder of Funding Circle, added: “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.”