Peer-to-peer lender Ratesetter valued at £200m in latest fundraising

City investors included Artemis are backing Ratesetter

Ratesetter has been valued at more than £200m in its latest fundraising after the peer-to-peer lender tapped investors including star fund manager Neil Woodford and investment firm Artemis for £13m.

The new equity brings the total amount raised by Ratesetter since it started seven years ago to £40m and comes a fortnight after the firm announced City grandee Paul Manduca as its next chairman. The fintech company, which bypasses banks by using technology to match up borrowers and lenders, will use the cash to fund its expansion as it prepares to offer a so-called “innovative finance ISA”.

By cutting out intermediaries and linking individuals and companies directly with investors willing to lend, peer-to-peer firms such as Ratesetter, Zopa, and Funding Circle attract customers with the promise of high rates of interest on the loans they make. This new type of ISA allows investors to put their peer-to-peer loans in an ISA wrapper enabling the lenders to earn interest free of income tax.

“It is important to keep up the momentum of investing in our platform and this further injection of capital, coupled with the appointment of Paul Manduca as chairman, lays the ground for an important new phase of development for our business,” said Rhydian Lewis, Ratesetter’s chief executive and founder.

Mr Woodford, who has his own investment firm, and Artemis first backed Ratesetter two years ago when they were among a group of investors that helped the company raise £20m.

The support by the two well-known City names as well as the recent appointment of Mr Manduca, the chairman of FTSE 100 insurance giant Prudential, have helped to instil confidence in Ratesetter at a time when peer-to-peer lenders face growing scrutiny of the potential risks for investors.

US peer-to-peer firm LendingClub became engulfed in scandal in 2016 when it emerged it had mis-sold loans, while Swedish business TrustBuddy went bankrupt in 2015 after it discovered “serious misconduct”.

Lord Turner, the former chairman of the now-defunct City regulator the Financial Services Authority, warned in February last year: “The losses on peer-to-peer lending which will emerge in the next five to 10 years will make the worst bankers look like absolute lending geniuses, because I think a group of people are going into a lending process with a tech platform without anybody really doing ‘go out and kick the tyres’ credit analysis.”

Ratesetter says it has originated loans worth nearly £2bn and handed more than £70m in interest to investors.