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Small Businesses Drive 43 Percent Growth In UK Alternative Finance

New data from the Cambridge Centre for Alternative Finance (CCAF) found the U.K.’s alternative finance market grew by 43 percent in 2016, and researchers are pointing to small businesses (SMBs) as a key driver of that expansion.

According to news from Reuters late last week, the survey, released on Friday (Dec. 8), found $6.2 billion was raised through alternative finance platforms like crowdfunding and peer-to-peer (P2P) financing in 2016, up from about $4.3 billion in 2015. Small businesses, startups and institutional investors are all fueling that growth, according to the CCAF.

Researchers said about 72 percent of market volume in 2016 can be traced back to demand for lending options among startups and small businesses, up from 50 percent the year before. That amounts to more than $4.4 billion driven by startups and SMBs in 2016.

Peer-to-peer businesses lending was 2016’s largest alternative finance market segment, which saw 36 percent year-over-year growth. According to reports, the alternative SMB finance space in 2016 amounted to 15 percent of all new small business loans provided by banks.

“Alternative finance has entered the mainstream and is likely here to stay,” said CCAF Executive Director Bryan Zhang.

Reports also cited recent statistics from several alternative SMB finance players in the U.K., which similarly signal industry growth. MarketInvoice said it has given out $2.28 billion in loans to SMBs since 2011, while Funding Circle said earlier this month it has linked nearly 40,000 businesses to financing since its 2010 launch.

The U.K. financial services space and its regulators have moved to increase competition in the market, especially when it comes to small business lending, as many traditional lenders pulled back from financing SMBs in the wake of the financial crisis. Last year, the U.K. implemented new rules that require traditional lenders to refer SMBs to an alternative finance provider if they are rejected for a loan. Traditional players have also begun partnering with alternative finance companies in an effort to fill service gaps to small businesses and consumers.


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