Irish peer-to-peer lender Linked Finance is planning to raise €5 million in new equity and up to €150 million in liquidity funding to help it finance its ambition to become the biggest non-bank lender to SMEs here by 2019.

The Irish Times has learned that London-based corporate finance group Liberum has been appointed to advise on the fundraising effort. Talks are being held with a range of potential investors and a deal is likely to close by the end of November.

It is understood that the new equity would be used for the hiring of staff, increased sales and marketing activity, and expanding its back office functions to support increased lending activity.

This will effectively be the third funding round by Linked Finance since it was set up in 2013. Founder Peter O'Mahony raised €350,000 from family and friends when he launched the business, along with €200,000 from Enterprise Ireland.

Frontline Ventures, a venture capital group with offices in Dublin and London, invested €2.5 million in the business last year and would be expected to follow its money.

It is believed that this equity raise is not designed to be a liquidity event for the original investors, who will stay involved in the business.

The company is also seeking to secure up to €150 million in liquidity commitments, which it would lend out over the next two years. This money is likely to come from institutions or pension funds and would diversify its funding base away from the retail investors.

It is understood that some of the equity investors could also contribute liquidity.

Potential sources

In terms of equity funding, Linked Finance is targeting three potential sources. This includes the Ireland Strategic Investment Fund, a State agency that grew out of the former National Pension Reserve Fund.

It is also looking at US and international funds who have capital to provide liquidity or loans via peer-to-peer platforms.

In addition, meetings have been arranged with a number of Irish, UK and US venture capital firms.

Separately, Linked Finance is in talks with the Strategic Banking Corporation of Ireland about providing liquidity funding.

Set up in 2013, Linked Finance has lent out €11 million to date. These loans, which range in value from €5,000 up to €100,000, have been funded by individuals wanting to get a return on their savings.

Digicel

In August, the company appointed former Digicel executive Niall Dorrian as its chief executive to replace founder Peter O'Mahony, who has become chief strategy officer.

Speaking to The Irish Times at the time of his appointment, Mr Dorrian said that Linked Finance needed to develop bigger relationships and partnerships if it was to fulfil its ambition to become the biggest non-bank SME lender in Ireland.

The company has set itself a target of lending about €350 million to Irish SMEs over the next three years. At present, about 95 per cent of lending to Irish SMEs is provided by the banks.

Latest accounts for Linked P2P Ltd show it had accumulated losses of just over €1 million at the end of April 2015.