As peer-to-peer lending, invoice trading and crowdfunding shift into the mainstream, the alternative finance market is set to double in size next year, with the sector set to reach a value of £4.4 billion
The report from charity Nesta and the University of Cambridge said alternative finance to businesses and consumers was set to hit £1.74 billion in 2014, before jumping to £4.4 billion in 2015. The market was only around £666 million last year.
A raft of finance providers have sprung up in the wake of the financial crisis when banks cut back on lending to SMEs, forcing them to look for alternative sources of finance.
The co-author of the Nesta report, Liam Collins said:
“These findings shed light on a growing movement that is revolutionising banking, investing and giving by using technology to simplify the links between those who want to invest money and those who need it. With bank lending to SMEs down again this quarter, it’s no wonder that alternative finance is fast becoming an important source of funding for individuals, businesses and organisations who struggle to access finance elsewhere.
“The UK is leading the way globally, and with significant potential for the market to expand it won’t be long before we see alternative finance moving into the main stream.
By the end of this year, it is expected that alternative British lenders will have provided more than £1 billion in business finance to over 7,000 SMEs during the year – or 2.4% of all bank lending to such companies. This proportion set to increase further as bank lending continues to fall.
Nesta’s study found peer-to-peer business and consumer lending continued to dominate the market, P2P will account for 1.3 billion pounds in total in 2014, while invoice trading will pull in 270 million pounds and crowdfunding 84 million pounds – a 201% increase on last year.
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