Annual British Banking Association data suggests that peer-to-peer business lending platforms have grown to account for 15pct of all new loans made by UK banks to small businesses. In 2016, equity-based crowdfunding accounted for 17pct of all seed and venture stage equity investment in this country.
Meanwhile, a recent annual report from Cambridge Centre for Alternative Finance attributes the greatest market share to peer-to-peer business lending, growing by 36pct to £1.23 billion in 2016. The UK online alternative finance market is reported to have grown 43pct in 2016 to reach £4.6 billion. The five largest alternative finance platforms are said to have accounted for nearly two-thirds (64pct) of total market volume.
The Cambridge Centre for Alternative Finance’s data reveals that P2P consumer lending amounted to over £1.1 billion, showing a 47pct year-on-year growth rate. Equity-based crowdfunding reached £272m (up 11pct on the previous year), while real estate crowdfunding dropped slightly (18pct) to £71 million. Reward-based crowdfunding accounted for £48m in 2016, up 14pct from 2015. Donation-based crowdfunding reached £40m – 233pct up on the previous year.
The report shows alternative finance becoming an increasingly valuable source of funding in the small business market. Almost three quarters of the volume raised — £3.3 billion — went to startups and small businesses, a 50pct increase on 2015. All in all, more than 33,000 firms used alternative finance in 2016, compared with around 20,000 in 2015.
Despite the growth in volumes, more than 35 UK online alternative finance platforms went out of business in 2016, due more to consolidation than regulation.