Alternative business finance surges amid modest rise in bank lending

21 January 2014

As figures from the Bank of England show a fairly modest in bank lending to small businesses in the three months up to November, Funding Circle today publishes its own quarterly lending figures for the last year which show businesses are continuing to seek out alternative types of finance and are increasingly using peer-to-peer lending to access the finance they need to grow and expand.

  • CEO of Funding Circle, responds to Bank of England small business lending figures
  • Funding Circle figures show over 730 small businesses borrowed more than £42 million in Q4
  • The Midlands, North East and London were fastest growing regions in last quarter

Responding to today’s quarterly lending statistics from the Bank of England, Samir Desai, CEO and co-founder of Funding Circle said:

“Whilst it’s encouraging to see a modest increase in bank lending to small businesses today, net lending is still negative and business lending in total is still around a third lower than it was in Q1 2008. What we are seeing is that businesses are increasingly moving away from using traditional sources of finance to help grow their business. At Funding Circle we are seeing exponential growth. The future of small business finance will have technology at its heart, ensuring access to finance in a fast and transparent way.”

More than 730 businesses across the UK borrowed more than £42 million in Q4. This was up from £37 million to over 570 businesses in Q3.

Q4 2012
(£m)
Q1 2013
(£m)
Q2 2013
(£m)
Q3 2013
(£m)
Q4 2013
(£m)
17.6 21.7 28.6 36.5 42.4

 

The Midlands, London and the North East were the fastest growing regions in the last quarter of 2013, showing 63, 40 and 36 percentage increase respectively in Funding Circle lending from Q3 to Q4.

Since its launch in 2010, Funding Circle has helped more than 3,000 businesses to borrow more than £200 million; £130 million of which was lent in 2013 alone.

Peer-to-peer lending continues to grow at an exceptional rate. A recent report by Government think tank, Nesta, predicted that the industry could become worth over £12billion per year.

Many businesses cite speed and convenience among their top reasons for turning to peer-to-peer lending.  Around half of businesses use the online marketplace to apply for loans outside of the traditional working day, with three quarters of these business owners using their evenings to apply and 15 per cent driven to the site on the weekend.  Independent research has shown that 77% of businesses that have borrowed through us would come back to us first, over traditional sources of finance.

British people and organisations such as the Government, councils and universities, continue to lend record amounts whilst earning inflation beating rates.  The record week for lending was in December 2013, when £5.3 million made its way to businesses across the UK in just seven days.

To be eligible, businesses must have a minimum turnover of £100,000 and have been trading for at least two years.

Once businesses pass Funding Circle’s credit assessment processes, their loan is posted on the marketplace. From here, investors choose which type of businesses to lend to, and bid the amount of money they wish to lend, and the interest rate they want to earn. Investors can bid small amounts, from as little as £20, on lots of different businesses to spread their risk.

 

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