The alternative finance sector has grown apace since Zopa first introduced their platform way back in 2005.
Since this time there has been significant growth in the sector both in the number of providers and the monies advanced. This expansion has of course has been encouraged along the way as a result of the 2008 financial crisis, with many individuals and businesses looking outside the traditional Banks for their finance.
In particular Peer to peer business lending, mainly to the SME sector, is growing by 250% per annum……
A growing market
It is expected that peer to peer lending to the SME sector will dominate the alternative finance market in 2014 with some £749 million lent through these platforms. This is major growth as in 2012 the amount lent was £62 million and in 2013 £193 million.
The data is taken from a recent report co-authored by Nesta, the innovation charity and Cambridge University, with support from the Association of Chartered Certified Accountants and Price Waterhouse Coopers.
The report says that lending from all Alternative Finance providers will be £1.74 billion in 2014 and expects this to more than double in the next 12 months. With this level of growth it is no wonder that the new Business Bank has supported the industry with some £400 million of additional funding.
Whilst of course this is great for the SME seeking a wider range of business finance solutions there is still a great deal to be done to make the sector a true challenger to the Banks.
Reluctance to borrow for fear of being declined
It seems there is still some reluctance by the SME to approach their bank for funding according to a recent report from SME finance monitor.
This is hardly surprising with statistics in the report showing that 50% of all new applications to the Banks for loans or overdrafts are currently declined!
Unfortunately many of those declined are not aware of the options available…..
Lack of awareness
The biggest stopper to the growth of this alternative finance market seems to be the lack of awareness of the SME. The Nesta report showed that only 5% of those surveyed had used Peer to peer business lending, and a massive 56% were not aware of this type of finance!
For the industry to continue growing at its current rate there will need to be increasing levels of education.
