Crowd Steps In Where Bankers Fear To Tread

P2PFA loans cumulative

Small businesses continue to suffer from a lack of proper financing. The UK government has consistently tried to stimulate lending to small and medium-sized firms (SMEs) through its Funding for Lending (FLS) scheme.

But the news continues to be dismal.  Figures for the second quarter of 2014 from the Bank of England show bank lending to SMEs actually dropped by another £435 million.

Nicola Horlick, CEO of loan-based crowdfunding platform Money&Co., commented on the numbers: “Today’s figures show that UK SMEs are still starved of the finance they need. Despite efforts to boost business lending through the Funding for Lending scheme, these latest figures reveal that the banks are still not doing enough to give SMEs adequate funding.

“Access to finance is the basic test of our economy’s ability to support growth. However, the traditional financial establishment continues to deprive SMEs of the funding they need, and UK businesses continue to struggle.

“Alternative finance, such as person-to-business lending, not only supports UK businesses, but also gives UK savers a new way to make their money grow.

If crowdfunding awareness figures are right, the ignorance is shocking

“The Government’s decision to open a consultation into new lending routes for SMEs will help boost awareness and understanding, but more needs to be done to open up avenues for growth.”

The ineluctable conclusion is that the FLS isn’t working.

Crowdfunded lending, however, is doing just fine.  According to second-quarter figures from the Peer-To-Peer Finance Association (P2PFA), crowdfunding lenders have lent over £500 million in the first half of 2014, and the crowd is comfortably on target to lend over a billion in calendar 2014.

The P2PFA sees steady growth from consumer and business borrowers, with the total amount lent by P2PFA members now an impressive £1,482 million.

The key question, though is how much growth there is in crowdfunding. One of the best ways of answering that is to monitor awareness of the crowd amongst SMEs. It’s a nebulous concept, but a number of surveys are due our shortly. At the moment, the numbers of self-proclaimed “aware” SMEs is generally thought to be between two and four per cent of all UK SMEs.

If those figures are right, the ignoirance is shocking – but a great opportunity for loan and equity funding providers. We await developments. 

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