The FLS is supposed to help the banks to make loans cheaply to small businesses, but the Bank of England today announced that net lending to SMEs fell by £723 million in Q1 of 2014. The British Chambers of Commerce (BCC) claim that the banks simply will not lend to SMEs, while the Forum of Private Business believes that it is the businesses that are reluctant to take on debt. That debate aside, there is a clear disconnect between credit-starved SMEs and traditional sources of finance.
It is this void that many see the burgeoning alternative finance sector filling. While the banks have been busy scaling down their lending to small businesses, SME lending in the p2p sector in Q1 of this year has already accounted for £168 million. These figures come courtesy of AltFi Data – who only this week highlighted the phenomenal growth of the p2p sector as it passed the £1.5 billion mark in total loans originated.
In reaction to today’s figures, Graham Wellesley – CEO of secured p2p lending platform Wellesley & Co. – weighed in:
“Today’s figures highlight the on-going challenges facing SMEs in accessing credit sources from traditional lenders and is a trend that is expected to remain for the foreseeable future. Of particular concern, in light of the UK’s on-going housing crisis, is the continued decline in lending to business’ in the real-estate sector. Now, more than ever, alternative finance providers are filling this vital funding gap and playing a fundamental role in supporting the recovery of UK Plc. We’ve just completed the UK’s largest peer-to-peer loan ever at a value of £8.3million and as traditional lenders continue to retreat from this space, we are leading the charge forward. We are funding the development of new properties as well as renovation of old properties which addresses the nation’s housing supply concerns, whilst generating an average return of 6% to our customers. Although it’s called peer-to-peer lending, our industry is providing traditional banking with a modern twist.”