Fast Facts About Alternative Finance

The UK now boasts over 2.7 million small or medium-sized enterprises (SMEs) which according to the FSB accounts for 60% of all private sector employment.

Sadly 80 to 90% of these small businesses fail because of poor cash flow. The problems start with late payments from customers or from a lack of quick access to finance and 55% of small businesses owners report that cash flow is their biggest obstacle to achieving success.

Fortunately the alternative finance industry has gone someway to fill the funding gap and more small businesses are choosing these lenders over their bank. This is due in part to the ever broadening range of products that provide more flexible solutions, serving them better than a standard bank loan or overdraft. Furthermore, while the bank can take weeks or in some cases months to make funding available, alternative providers, who use technology for underwriting decisions, often fund companies within a few days of the application.

The alternative finance industry provided a record level of funding for 2017. Here are some fast facts about this growing industry:

1) The alternative finance sector is predicted to be worth £12.3 billion by 2020 in the UK and 60 billion globally

2)The UK is at the centre of the European alternative finance sector and the UK’s alternative finance market grew by 43 percent in 2016. Researchers are pointing to startups and small businesses as the key driver for that expansion

3) 75% of businesses that apply to banks for finance are declined and the British Business Bank estimates that loan rejections cost small businesses more than £4 billion per year

4) 52% of SME owners are now aware of finance options beyond traditional banking

5) Peer-to-peer lending is the largest market segment of alternative finance, with €366 million recorded in Europe

6) The average deal size in equity crowdfunding is now approximately €459,000

7) More entrepreneurs are turning to the crowd for brand validation, marketing and the opportunity to engage directly with their customers and stakeholders as well as funding

8) The equity-based crowdfunding sector has grown by 295% from £84 million to £332 million since 2015

9) A merchant cash advance is the most favoured choice for retailers. This fast and flexible cash advance is repaid flexibly via a pre-agreed percentage of future card transactions, meaning businesses only pay back as they earn

10) 2018 will be the year peer-to-peer comes of age due to many of the leading platforms launching their innovative finance ISAs. The new products are expected to raise “hundreds of millions of pounds, eventually rising to billions in the long term”.

 

Sources:

FSB – http://www.fsb.org.uk/media-centre/small-business-statistics

Cambridge Centre for Alternative Finance (CCAF)  – https://www.jbs.cam.ac.uk/faculty-research/centres/alternative-finance/

Intelligent Partnership – https://intelligent-partnership.com/

British Business Bank – https://british-business-bank.co.uk/

Money High Street – http://moneyhighstreet.com/17-facts-alternative-finance-2017/