Peer-to-Peer Platforms Continue to Fill FLS Void

By AltFi on 28th August 2014

P2P/Marketplace Lending

The latest quarterly update on the government’s Funding for Lending scheme highlights the continued failure of the banks to provide finance for small UK businesses.

Peer-to-Peer Platforms Continue to Fill FLS Void

Net lending to SMEs under the FLS fell by around £400m, after dipping by an even greater £700m in Q1 of 2014. Indeed, net lending to all kinds of businesses fell by approximately £3.9bn. The continued decline of traditional providers’ lending to small businesses stands in sharp contrast to the rapidly increasing activity of the UK alternative finance sector. According to figures from AltFi Data, peer-to-peer lenders accounted for £322m of lending over the course of Q3. The specifically peer-to-business platforms made up £204m of that figure.

Louise Beaumont, Co-Founder of major invoice finance provider Platform Black, commented:

“Today’s Funding for Lending Scheme report shows that it is no longer sustainable for SMEs to look to traditional finance as the only way to grow and maintain their businesses. Alternative Finance is rapidly becoming part of the mainstream landscape of funding options and is now beginning to play a significant part in shaping the recovery.

“These latest figures from the Bank of England show that it is time to call the nurse as far as bank lending is concerned.  Despite good indicators of recovery from nearly every other source, bank lending has flat lined and is displaying no vital signs.  This is serious because the banks are still holding SMEs and the economy back when it comes to expected growth”.

“SMEs need better awareness of, and access to, other funding options so that the scales between bank led finance and other sources of finance are balanced. This will not only lead to a more competitive financial marketplace, but also to economic growth.”

Making small businesses more aware of the variety of options at their disposal has been at the forefront of the many alternative finance providers’ concerns. George Osborne recently confirmed that the British high street banks will be made to refer the SMEs which they reject for lending onto alternative finance platforms. ISA inclusion – although primarily an investor benefit – will go a long way towards elevating the profile of the sector. Even news like today’s landmark announcement that Lending Club will soon stage its IPO will do its bit in bringing the many peer-to-peer platforms into the plain sight of small business borrowers.

James Meekings, Co-Founder of Funding Circle, also weighed in on the FLS scheme’s failings:

"Funding for Lending is failing to help the thousands of British businesses that need finance but can't access it. It is time to accept that these types of support facilities, using banks as the primary distribution channel, are no longer the answer. "

"Instead alternative sources of finance, like peer-to-peer lending, are proving to be a better way for the Government to get finance through to hard-working British businesses. At Funding Circle we are just one of the recipients of investment via British Business Bank. This money has helped around 2,300 businesses access finance and this figure is increasing every day."

"Together we're creating a more diverse and fairer financial system which is better for both businesses and investors.”

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