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Zopa raises £140m at eleventh hour in bid to secure banking licence

Zopa said it has raised £140m from a key investor just hours ahead of the deadline to secure a banking licence.

The world’s oldest peer-to-peer lender has struck its largest funding deal to date with IAG Silverstripe, an investment arm of IAG Capital.

Zopa said it now expects the new cash will allow it to meet capital requirements that enable it to gain full banking accreditation.

The bank had until midnight tonight to meet the requirements of City regulator, the Financial Conduct Authority, who awarded it a banking licence with restrictions on 3 December last year. Failure to do so meant it would have lost its limited licence.

 

Tougher deal terms

Zopa was in crunch talks with IAG Silverstripe over this funding as the peer-to-peer lender raced against time to secure the crucial cash.

IAG Silverstripe took part in the lender’s last cash call in November 2018, raising £50m.

However, at the weekend IAG Silverstripe was able to dictate tough terms, as it emerged from the deal as Zopa’s largest shareholder at a deeply discounted rate to last year’s fundraising.

A Zopa spokesman “would not comment” on holdings in the company or the details of the fundraising.

 

Cash in the bank

Zopa, led by chief executive Jaidev Janardana (pictured) said: “This new funding means we have concluded the fundraising phase of our bank mobilisation.”

He added: “We continue to hold our bank licence with restrictions and are working closely with the regulators to gain our full licence.”

Zopa, alongside Funding Circle and Ratesetter, is referred to as one of the UK’s Big Three peer-to-peer lenders. These lenders use algorithms rather than banks to match consumer borrowers with a diverse range of investors.

Zopa, founded in 2005, carried out its funding round at a turbulent time in the industry.

 

Hard times for peer-to-peer lending

Funding Circle, the biggest lender of this type in the UK, cut its growth forecast in half to 20 per cent in July.

Also, several peer-to-peer lenders such as Lendy and FundingSecure have collapsed this year, owning hundreds of millions to investors.

In July, Zopa was planning to raise as much as £200m, according to Bloomberg, and that the lender was in discussion with private equity and sovereign wealth funds.

Zopa has originated over £4bn of loans between 500,000 people, generating around £250m of interest for investors, since it was founded 14 years ago.

 

 

 

 

 

 

 

 

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Roger Baird

Roger Baird is News Editor at Finixio. He has worked as a financial journalist for 20 years reporting on companies, capital markets and the UK economy.