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Alternative Funders Close Up the Quarterly FLS Gap




By Ryan Weeks on 27th November 2014


SME lending under the Funding for Lending Scheme continues to follow a downward track.

 

The Bank of England publishes quarterly updates on the numbers behind the FLS scheme –releasing the Q3 iteration this morning. Net lending to small businesses by FLS Extension participants came out as -£128m. Whilst this number represents a less severe decline than in previous quarters, it’s bad news once again for the nation’s small businesses.

 

On the flip side, the SME-facing alternative finance providers continue to thrive. In fact, this is the first time that the cumulative lending total of the UK’s peer-to-business lenders and online invoice financiers has been larger than the quarterly decline in FLS net lending. According to AltFi Data, alternative business funders channeled £268m of SME funding over the course of Q3. In other words, alternative finance providers have now scaled to a point where they are not only addressing the SME funding gap, they are closing it. Indeed, alternative lenders not only filled the FLS void in Q3, they in fact provided small businesses with an extra £140m after the fall off in traditional lending activity had been accounted for. 

 

 

Samir Desai, Chief Executive of Funding Circle, weighed in on today’s data – appropriately making reference to a changing of the guard:

 

“Funding for Lending is still not helping enough small businesses access finance. Net lending is flat and 86% of small businesses that use the Funding Circle marketplace believe the scheme is not working for them*.

 

“Whilst Funding for Lending figures continue to remain muted, marketplace lending is growing exponentially. Based on today's figures, Funding Circle is now the 4th largest net new lender to businesses in the UK and has now helped more than 6,000 businesses access the finance they need to grow. We are witnessing a changing of the guard in the business lending space.”

 

“More banks are not the answer. Online marketplaces add diversity to an old system badly in need of modernisation and provide a better service to small businesses."

 

*Samir’s comment is based upon a recent survey of Funding Circle’s successfully financed small businesses. We’ve summarized some other key findings from the poll below:

 

  • 95% of small businesses want to see more collaboration between Government and the financial services industry to ensure that they can easily access finance.
  • 97% of small businesses believe the Government needs to do more to ensure businesses can easily access finance.
  • 55% of small businesses back George Osborne’s proposal to require banks to refer all SMEs that they are unable to help with funding to alternative finance providers.

 

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