News

21 Jan 2019

Alternative funding attractive for small UK businesses  

Reports have indicated that more businesses are turning to the UK online alternative finance market in order to power business growth.

According to the latest UK Alternative Finance Industry Report, £6.2 billion was lent to businesses in this way during 2017, an increase of 35% on the previous year, with peer-to-peer (P2P) business lending playing an increasingly important part in the financing of smaller British businesses.

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The report suggested that that peer-to-peer lending retained the top spot as the largest source of alternative finance with £2 billion in transaction volume and accounted for 29.2% of all new bank loans to small businesses in 2017.

Following P2P business lending, the largest UK alternative finance categories in 2017 were:

• P2P consumer lending
• P2P property lending
• Invoice trading

The study found that 40% of funding for P2P business lending was provided by institutional lenders including mutual funds, pension funds, asset managers, banks, family offices and other financial institutions.

This trend of institutionalisation was also seen in equity-based crowdfunding, where 49% of the funding was provided by venture capital funds and professional investors “co-investing” with retail investors.

Bryan Zhang, executive director of the Cambridge Centre for Alternative Finance said, “This report reflects an industry that is playing an increasingly important role in helping consumers and businesses access finance, whilst growing to become more diversified, sophisticated and institutionalised.”

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