UK alternative finance market worth £76bn a year
Alternative lending to small businesses now equivalent to 46% of the value of traditional loans and overdrafts
The UK's small and medium businesses are now using £76bn worth of alternative finance each year, up 43% from a year ago, research from Funding Options has claimed.
The study argues that small firms are increasingly shifting to alternative lending choices such as invoice finance, leasing and crowdfunding as “banks continue to pull back from lending to smaller businesses”, with alternative lending now equivalent to 46% of the value of traditional term loans and overdrafts.
According to the research, traditional finance has fallen to a value of £163bn; down 5% from £172bn last year and a 17% drop for £197bn in 2011.
The two most popular forms of alternative finance used by businesses of all sizes were found to be asset finance and leasing (£27.1bn provided in the last year), and invoice and asset-based lending (£18.9bn is currently in use).
Funding Options says banks are being forced to continue to reduce their exposure to small business lending, as regulators class it as riskier than other in-demand forms of lending, such as residential mortgages and loans to larger businesses.
Conrad Ford, Funding Options CEO, commentED: “Alternative finance has now passed its tipping point. It is now used by a huge number of small and medium enterprises in every sector of the economy, and is closing the gap with bank lending.
“It might be alternative in name, but it’s now completely mainstream. Virtually any business can now find a workable solution to its funding needs through the vast range of options available in alternative finance.”