Going online offers new funding opportunities for small business

Internet-based ‘P2P’ lending amongst emerging non-bank finance options for SMEs


Small businesses may not need to struggle with obtaining loans from reluctant banks, with a new crop of online services in the UK providing an increasingly viable alternative to traditional lending, a new study claims.

The ‘Seeds of Change’ report, from the Centre for the Study of Financial Innovation with ACT and Nabarro, highlights a number of alternative options for SMEs to obtain much-needed funds, including peer-to-peer (P2P) lending services such as Funding Circle, where investors can lend directly to small businesses without the need for a middleman, and ‘crowdfunding’ services, where businesses can appeal directly to the public for investment. The Breedon report, released in March by the Department for Business, Innovation and Skills, estimated that the ‘gap’ between demand and supply of loans for small businesses might be as much as £59bn between 2012 and 2016, and the new study offers hope that these services might go some way to fulfilling this demand for finance. Alasdair Steele, corporate partner at Nabarro, commented: “This report highlights that there are a lot of alternative options available to SMEs aside from bank loans, and hopefully it can broaden the perspective of small business owners looking to obtain funding. As the Breedon report shows, bank debt is often difficult to come by, and through online platforms such as Funding Circle businesses can appeal directly to any investors who may be interested.”

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