Peer to Peer Lending in the UK: A Vital and Credible Alternative?
Across the United Kingdom the P2P (Peer to Peer) market is gaining a lot of traction. This follows the fact that alternative lenders are now being seen as vital and credible alternatives to banks when it comes to providing finance for business. Some of the new P2P providers include Rebuilding Society, Thincats, Assetz Capital and Funding Circle and are providing the most affordable and flexible lending facilities to the UK’s small and medium businesses market.
In fact, recent estimates are indicating the entire sector will be worth billions of pounds in just ten years where the middle men will be cut while giving an advantage to investors seeking ways of supporting viable fresh initiatives.
It is also clear marketplace lending has changed and way too mainstream, especially after the government’s
announcement it’s mandatory for small businesses to be referred to other alternative financial providers in case banks are not able or in a position to offer finances. As a result, the referral arrangement will help over 250,000
small firms to get the funds they need to boost their investments. It is also clear Peer to Peer lenders have also displayed great ambitions to be another vital part of the lending world while shaping the way funds are offered.
Up to now, P2P have been facing a number of obstacles such as ineffective awareness that has remained very low across the SME world that the system is seeking to attract. However, business owners will now have a choice before them once they have gone searching for finances and must be told about other options of alternative funding any time a typical lender is not willing or able to help. For example, RBS, who are older lenders, collaborated with other alternative lenders by referring SME borrowers to P2P financiers such as Assetz Capital and Funding Circle.
Essentially, Funding Circle seems to have a very good track record when it comes to lending to small business and its partnership with an old high street financier makes a lot of sense. The P2P lender helps small businesses to fund their investments, particularly those that had no idea peer-to-peer is a lending option. Essentially, the success of the collaboration is expected to boost awareness of P2P lending and perhaps act as the blueprint of any future partnerships between mainstream banks and peer-to-peer providers.
A shot in the arm for SMEs
Across the UK, financing small businesses has been very challenging due to the fact that the economy in many areas has not been doing very well. P2P partnerships are now appearing as the kind of boost small businesses need, particularly those struggling for finance. The SME financing problem has been well highlighted by figures released recently showing that for every eight pounds only one pound finds its way to businesses. P2P lender such as Funding Circle have already provided more than 7,000 businesses with over £537 million with the final quarter of last years seeing £100 million advanced to SMEs.
In fact, via Isas, the government has made it easy to invest in peer-to-peer, tax free.