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Business funding outside the banking system doubling every year

Wednesday 7 January 2015 | 11:44 AM CET

Alternative finance businesses, which find backers for small companies that can’t get bank support, are almost doubling every year, having reached a GBP 1 billion milestone for lending in 2014, online media outlet dailymail.co.uk reports.

According to the source, Louise Beaumont, founder of Platform Black and now head of public affairs at AIM-listed GLI Finance, has pointed out that the “industry has evolved at a rapid rate with the estimated size of the UK alternative finance market in 2014 at GBP 840 million and the year on year growth rate at a staggering 90%”. She continues by adding that “although the proportion of annual UK business lending provided by alternative finance is still a drop in the ocean at 2.4%, it is this sector which is incubating the businesses fuelling our economy – the small and medium-sized enterprises”.

The source adds that the Chancellor’s acknowledgement in the Autumn Statement that investors can now offset any losses from alternative finance platforms against income from other such loans will bring peer-to-peer loans (lending directly from one company or individual to another) in line with other more traditional investments.

The source also highlights that the new year will see banks reaching out further to the sector and acknowledging their place within it. GLI Finance is already supported by Barclays, which holds a 3% equity stake, and FundingKnight, part of the GLI Finance family, has been approached by a foreign bank to use its platform as a more efficient way of originating SME loans. Beaumont added: 'There is no doubt that the demand for alternative finance will grow dramatically in 2015 as more and more SMEs realise the potential and benefits of alternative finance providers”.

The source concludes that this global surge is already happening. The Bank of England’s Funding for Lending figures already reflect this shift with 2014 figures showing a decline by GBP 400 million of bank lending to SMEs against an estimated GBP 1 billion in business finance to more than 7,000 small and medium-sized businesses within the UK alternative finance market.

GLI Finance itself has 16 different alternative finance platforms including Platform Black.

More: Link
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