DevDosh Ltd has looking at the rise of alternative lending over the past 5 years has been nothing short of exceptional, once a bit part player in the financing world competing with and playing second fiddle to the traditional Funding for Lending Schemes.
We have seen them become an integral and important part of the financial system working side by side with the conventional Funding for Lending Schemes, providing the banks with an avenue for quicker more streamlined funding to SMEs.
A study conducted by the state-backed British Business Bank confirmed their importance and how the distinction between alternative finance and traditional finance is becoming harder to define.
The report by the British Business Bank was released only this week and made for very interesting reading when it stated that 94% of finance for SMEs was routed through Funding Lending Schemes other than the United Kingdom biggest four banks, with alternative lending platforms, crowdfunding and P2P lenders providing as a main conduit for the British Business Bank Funding.
The annual report which DevDosh Ltd found explained the British Business Bank expedited over $930 million in SME loans in 2016, and, according to the data, year on year ever increasing amounts of that money is finding its way to UK small businesses thanks to teamwork between alternative lenders like RateSetter and Funding Circle. According to reports, in 2014 the percentage of BBB funds that went through a P2P platform was 79 percent; in 2015, it was 90 percent.
According to research from The British Bank more and more of UK small to medium enterprises are becoming aware of the alternative finance option, with as many as 50% confirming they are familiar with alternative finance.
“Over the past year, we have delivered strongly against our four key performance indicators, broadening our support to provide more finance and extra choice for smaller businesses at all stages of their growth,” said BBB Chief Executive Keith Morgan in a statement. “It has been a year of significant expansion, as our market impact continues to grow, we are well-placed to respond flexibly to challenges ahead, helping to increase the amount and range of finance available to smaller U.K. businesses.”
The sole purpose the government had in mind when it established the British Business Bank was to help the SME’s located in the UK have greater access to funding.
In DevDosh Ltd opinion, The rise of alternative financing like crowd funding and peer to peer lending has made the banks sit up and take notice.
“The centerpiece of the P2P offering is the level of information, convenience and speed, which add up to a compelling customer experience,” said the BBB’s Morgan in a statement last April. “I think P2P is here to stay, but I’d certainly expect the banks to react, as any business would react commercially.”
In line with the partnerships that traditional Fls and alternative finance companies have forged UK banks are now obliged to refer any SME that it rejects for a loan to alternative lender.
“There is no doubt that U.K. SMEs are facing a working capital crisis at the worst possible time,” said Tony Duggan, chief executive of Crossflow Payments, in a statement earlier this month expressing his concern for the current state of SME finance in the country. As some industry players believe, collaboration between traditional and alternative financiers may be the key to relieving that crisis, especially as awareness of alternative options increases among small business owners.
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