UK peer-to-peer lender Funding Circle expands with U.S. deal LONDON (Reuters) - A British website which enables members of the public to lend to small businesses is expanding into the United States via a merger with another so-called 'peer-to-peer' lender. Funding Circle, the broking platform through which people can earn interest by lending as little as 20 pounds ($32.4), said on Thursday it was joining forces with San Francisco-based Endurance Lending Network, which will now operate under the Funding Circle name. Peer-to-peer lenders, along with crowdfunding sites, have developed to help fill a gap left by reduced bank lending due to tougher capital requirements and greater regulatory scrutiny. Since launching in 2010, Funding Circle has helped businesses borrow more than 160 million pounds. The site says investors, who on average lend 6,000 pounds, receive an average net return of 5.8 percent on their money. That compares with around 3 percent on a regular UK savings account. "The idea is to build an international business that can help small businesses access finance, ... help investors get better returns and really turn the banking system upside down," co-founder and Chief Executive Samir Desai told Reuters. Funding Circle did not disclose the terms of the merger but said to help fund the growth of the U.S. business as well as expand the range of products it offers in the UK it had raised $37 million in a new round of venture capital funding from backers including early Facebook investor Accel Partners. Funding Circle, whose board members include Edward Wray, the co-founder of online gambling company Betfair, is also backed by venture capital firm Index Ventures. Unlike Funding Circle, Endurance Lending's site is only open to accredited and institutional investors, due to differences in regulation. Desai said initially it would continue this way but longer term the plan was to include smaller investors. We will work within those current constraints. Allowing retail investors to invest is in our DNA," he said. So eventually we will be looking at ways that we can allow retail investors to lend. Desai said he hoped institutional investors on both sides of the Atlantic would lend across the two sites, which will operate separately due to the regulatory differences. British peer-to-peer lenders are due to be regulated by the Financial Conduct Authority from April next year. In U.S. sites are regulated on a state-by-state basis, with Endurance already regulated in 31 states. Earlier this year the British government said it would lend 20 million pounds through Funding Circle as part of its efforts to help drive an economic recovery by boosting funding for small businesses. Desai estimated close to 15 million pounds of that had been lent so far. ($1=0.6168 British pounds)