Peer-to-peer borrowing rises to 29% of UK SME lending

The UK’s booming alternative finance market burgeoned to over £6bn last year, research published Friday showed, as peer-to-peer lending continued to flourish.

The fifth annual UK Alternative Finance Industry Report by the Cambridge Centre for Alternative Finance (CCAF) found that market volume grew 35% to £6.2bn in 2017, as small and medium-sized companies eschewed traditional ways of financing their businesses, such as bank loans, in favour of alternative methods.

CCAF found that peer-to-peer business lending made up the biggest part of the UK alternative finance market, up 65% year-on-year at £2bn, and was dominated by SMEs. The report estimated that peer-to-peer business lending was the equivalent of 29.2% of all new bank loans to small businesses in 2017, nearly double 2016’s figure of 15.3%.

The next biggest segment was peer-to-peer consumer lending, at £1.4bn, followed by peer-to-peer property lending at £1.2bn and invoice trading, at £787m.

Brian Zhang, executive director of CCAF, said online alternative finance had an “increasingly important role in helping consumers and businesses access finance, while growing to become more diversified, sophisticated and institutionalised.”

The report was carried out with the Peer-to-Peer Finance Association and the UK Crowdfunding Association. It included responses from 75 platforms that between them have around 95% of the known UK online alternative finance market.

Funding Circle, the platform for small business in the UK, US, Germany and the Netherlands to borrow from a wide range of investors, floated in London earlier in the autumn. Investors on the platform lent £1.7bn last year, unlocking 75,000 jobs, according to research by Oxford Economics.