UK alternative finance market worth £4.6bn

New research from the Cambridge Centre for Alternative Finance has found that the UK online alternative finance market grew 43 per cent in 2016 to reach £4.6 billion.

Peer-to-peer business lending became the largest market segment, growing by 36 per cent to hit £1.23 billion in 2016. Peer-to-peer consumer lending contributed £1.17 billion with a 47 per cent year-on-year growth rate, while peer-to-peer property lending recorded £1.15 billion with an 88 per cent annual growth rate.

Both invoice trading and equity-based crowdfunding also experienced growth to reach £452 million and £272 million respectively, while real estate crowdfunding dropped 18 per cent to £71 million in 2016.

Business funding transacted for startups and SMEs grew by 50 per cent in 2016, from £2.2 billion to £3.3 billion. In total, it is estimated that 33,000 firms utilised various debt, equity or non-investment (e.g. reward-based crowdfunding) alternative finance channels and instruments to raise funding, representing around 2.5 per cent of the UK’s 1.3 million employers.

Annual British Banking Association data also implies that peer-to-peer business lending platforms are now facilitating the equivalent of 6.5 per cent of all new loans lent to SMEs, or the same as 15 per cent of all new loans lent to small businesses by UK banks.

Bryan Zhang, author of the report, commented: “Online alternative finance has become an ever more established component of the UK financial landscape. Since 2011, more than £10 billion worth of funding has now been intermediated through various online alternative finance platforms in the UK.

“Online funding channels, such as crowdfunding and peer-to-peer lending, have not only entered common discourse, but have also become embedded in the everyday infrastructure of finance; in many instances, they are now one of the default fundraising and investments channels for businesses, retail investors and institutions.”

He added: “With equity-based crowdfunding now accounting for 17 per cent of all seed and venture stage equity investment in the UK, and peer-to-peer business lending providing an equivalent of 15 per cent of all new loans lent to small businesses by UK banks, alternative finance has entered the mainstream and is likely here to stay.”

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