Peer-to-peer lender Zopa has secured an 11th hour £140 million funding lifeline needed for plans to become a full challenger bank.
Britain’s oldest peer-to-peer lender raised the funding from IAG Silverstripe, which is part of American private investment firm IAG Capital, and is understood to have been handed a significant stake in return.
IAG Silverstripe was already a minority investor in Zopa since October last year.
The funding deal was announced hours before Zopa’s conditional banking licence expired on Tuesday.
It was granted a conditional banking licence last December and was given a year to raise regulatory capital and boost its balance sheet strength to allow regulators to consider lifting restrictions.
Zopa said the funding will allow it to carry on with plans to gain a full licence to offer products such as deposit accounts and credit cards.
Jaidev Janardana, chief executive of Zopa, said: “This new funding means we have concluded the fundraising phase of our bank mobilisation.
“We continue to hold our bank licence with restrictions and are working closely with the regulators to gain our full licence.
“We are excited that once approved, Zopa will be able to launch its bank alongside its peer-to-peer business and offer a broader set of products to our customers.”
Zopa previously raised £60 million from new and existing investors and Mr Janardana told the PA news agency last December he would consider a stock market flotation in two or three years’ time to help the firm expand and take on the high street players.
He said at the time that he wanted Zopa to be a top 10 bank in the next three to four years.
But regulators have since launched a crackdown on peer-to-peer (P2P) lenders, announcing new rules over the summer to protect investors.
The clampdown followed the collapse of Lendy, one of the largest lending platforms in the sector, which had more than £160 million in outstanding loans and was more than £90 million in default.
The Financial Conduct Authority introduced the new set of rules, which it said will “better protect investors” while allowing lending platforms to operate sustainably.
Zopa, which was created 14 years ago, had initially planned to roll out new products this year with the aim to provide an alternative offering that uses tech innovation to its best advantage and offers more control and a better service to customers.
Its P2P lending business has so far lent £5 billion in unsecured personal loans to customers in the UK and it has 500,000 customers.