The UK’s alternative finance market for businesses is projected to reach £10 billion by 2020, according to a new report.

Peer-to-business (P2B) lending stood at £1.2 billion in 2014 but its predicted surge could be a boon to small and medium sized enterprises, said Fiserv, which commissioned the study by the Centre for Economics and Business Research (Cebr).

The research noted that despite generating 43 per cent of all private sector turnover in the UK, the credit environment for SMEs had remained challenging since the global economic crisis. Although 58 per cent of SMEs said that they still had limited knowledge about sourcing alternative finance, the massive growth in the market could change the lending landscape, found the Future Trends in UK Banking report.

P2B lending generated just £20 million in 2011, while crowdfunding – an even newer market where businesses can raise money from an online community or group of people – was estimated to be worth £310 million in 2013. But recent strong growth could see more lenders flood into the market, the study predicted.

Travers Clarke-Walker, Fiserv’s chief marketing officer, said: “Our research suggests that improved and user-friendly technology is impelling the growth of alternative finance in the UK. We have seen the P2B and crowd-funding sectors engaging in a concerted marketing push, which is likely to raise awareness significantly. The buzz around alternative finance for SMEs is giving alternative financers legitimacy and encouraging SMEs to try these alternative funding options.”

He added: “As SMEs and consumers demand new products and services, there is a significant opportunity for banks to innovate with their own new products or to co-exist through partnership with startups and alternative lenders. By embracing technological advances, financial institutions can also contribute to serving SMEs with this growth in new forms of lending and expanded credit.”

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