Lancashire County Council is planning to invest an initial £100,000 to part-fund investment in local businesses through Funding Circle, a peer-to-peer website that allows companies to find finance independently of their banks.
The council believes the project has the potential to become "a multi-million-pound commitment" over the next five years. "This is a ground-breaking way to fund business growth and a first for any council in the UK," says county councillor Michael Green, a Cabinet member with responsibility for economic development. But why is this so important?
Funding for Lending scheme
First, the fact that a local council is spending government money to help local businesses makes me wonder how well the coalition's Funding for Lending scheme is faring.
The scheme, rolled out in July 2012 by the Bank of England (BoE) and HM Treasury, aims to stimulate the economy by making cheaper loans available to firms and individuals across the country.
It works by allowing banks and building societies to borrow from the BoE for up to four years; the banks that increase their lending pay the lowest fees, while those reducing their lending pay a higher fee.
It's too early to tell if the scheme will be a success but Lancashire Council's decision to help local traders through a peer-to-peer platform suggests smaller firms are still struggling to obtain funding the traditional way.
Second, while this is a first for a local authority, more customers are shunning high street lenders in favour of non-traditional institutions. Peer-to-peer, or 'social' lenders such as Zopa, RateSetter and indeed Funding Circle, are gaining popularity.
Since their first arrival on the scene in 2005 until July 2012, UK peer-to-peer lenders collectively lent £300 million. Social lending works on the basis that the money that ends up in borrowers' pockets comes directly from the wallets of ordinary individuals who want to make a return on their cash by helping someone out.
Credit unions, meanwhile, are also experiencing a renaissance. Once known as 'the poor man's bank' because of their policy of not rejecting anyone, credit unions now have more than one million members.
In addition, three new providers – Metro Bank, Virgin and M&S Bank – have also entered the market in the past two years – all the more astonishing when you think that Metro Bank was the first new high street bank in Britain in 100 years.
So why the appetite for change? To put it simply, savers and borrowers are getting a raw deal from high street banks. Low interest rates mean there's little chance of making a decent return on your money, while tight lending criteria have made it harder than ever to borrow.
However, the real reason behind the popularity of non-traditional lenders is to do with trust. Following the banking crisis and fiascos such as the payment protection insurance mis-selling scandal, people no longer trust the big names. They feel they are not valued as customers but seen as cash cows for 'customer advisers' to milk.
The rise in popularity of alternative ventures was reflected in the 2012 Moneywise Customer Service Awards, which attempt to find the financial services providers you can trust. Zopa, for example, was voted best loans provider, while John Lewis Insurance won the most trusted home insurer award.
The results are solely based on what you, the customers, think. More than 14,000 of you completed our survey last year. The 2013 survey is live now - cast your vote at moneywise.co.uk/moneywise-consumer-opinion-survey-2013.
And remember, until the big banks start to respond to your needs, vote with your feet and consider the newcomers. You might be pleasantly surprised.