INTERNET entrepreneur Bill Dobbie has launched a Scottish-based crowdlending platform aimed at offering small businesses an alternative to bank funding.

LendingCrowd has hired three bankers with a combined 100 years of experience as a safety net for investors attracted to the SME sector by promised returns of between six per cent and 13 per cent.

Mr Dobbie co-founded web-hosting group Iomart in 1998 and online dating site Cupid in 2005. He stepped down as chief executive at Cupid a year ago after a share price slump but remains on the board, and his stakes in the two companies are worth around £11million.

He and co-founder Stuart Lunn, a former equity analyst, formed the company in January with £1m-plus of equity funding.

Mr Dobbie said: "I have been using peer-to-peer lending platforms for four years and I realised it's a win-win business for the investor and the small business.

"It's a very good long-term business opportunity in a sector that can only grow."

He added: "The company is going to be in the handful of main players in this market-place and we plan to raise secondary equity sometime next year."

LendingCrowd has made four loans worth £250,000 since its informal launch last month.

It operates an order-driven exchange where the most competitive bids fund the loan application, providing the borrower with the lowest interest rate on their loan.

Investors have a choice of risk categories, with corresponding returns, and a minimum investment of £20.

Mr Lunn said the venture had built in expert credit risk assessment, and would also "work with the company to try to shape the deal", rather than just approve an application.

Unlike banks and other platforms, LendingCrowd would enable companies to "speak to the decision-makers" directly about their loans.

"We think there is an opportunity for be a bit more proactive and transparent."

He said loans would be secured on a combination of personal guarantees and floating charges. "We charge a one per cent annual management fee against funds loaned out and there will be defaults down the line because it is an investment product, but we think across the board on a diversified portfolio a two per cent default rate."

Mr Lunn said rivals were all based in the south, and Scotland offered a vibrant SME sector and plenty of high net worth or 'mass affluent' potential investors.

"We want to be seen as the leading provider in Scotland...but we want to become UK-wide."

The business already employs 12 staff and the same number of contractors.

Mr Lunn said. "We are not a typical start-up, we have gone into it with a proper balance sheet."

The Treasury is currently consulting on a new category of Individual Savings Accoount which could include peer-to-peer products.

Mr Lunn said this could be a key driver of growth.

"Across all P2P lending platforms there have only ever been 110,000 investors, but there are 14 million Isas, 70 per cent of which are cash Isas, which shows there is a huge opportunity into the mass market."

Around 7,000 SMEs have so far used crowdlending platforms to access loan finance in the UK which is expected to top £1 billion by the end of 2014.

Mr Dobbie added: "My involvement in start-ups and SMEs made me realise the difficulties for small businesses to secure loans. We recognised that the traditional model of lending doesn't work for all borrowers all of the time and wanted to develop a credible alternative."

He said few P2P lenders had so far succeeded in raising funding themselves in the market-place but LendingCrowd was confident of doing so.