According to the Cambridge Centre for Alternative Finance, the UK online alternative finance market volume rose by 35% in 2017 to £6.2bn.
The 5th UK Alternative Finance Industry Report found that peer-to-peer business lending had become an increasingly important part of overall financing of smaller British businesses.
It retained the top spot as the largest source of alternative finance with £2b in transaction volume, up 65%. It accounted for 29.2% of all new bank loans to small businesses in 2017, nearly double the 15.3% achieved in 2016.
Following P2P business lending at £2bn, the largest UK alternative finance categories in 2017 were P2P consumer lending at £1.4bn, followed by P2P property lending at £1.2bn and invoice trading at £787m.
Equity-based crowdfunding grew by 22%year-on-year to reach £333m but debt-based securities stagnated at £79m. Real estate crowdfunding increased by more than 200% to £211m, but donation-based crowdfunding only grew by 2.5% to £41m.
Reward-based crowdfunding decreased by £4m year-on-year to £44m in 2017.
The study found that 40%, up from 28% in 2016, of funding for P2P business lending was provided by institutional lenders including mutual funds, pension funds, asset managers, banks, family offices and other financial institutions. This trend of institutionalisation was also seen in equity-based crowdfunding, where 49% of the funding was provided by venture capital funds and professional investors “co-investing” with retail investors.
Bryan Zhang, executive Director of the Cambridge Centre for Alternative Finance said: “This report reflects an industry that is playing an increasingly important role in helping consumers and businesses access finance, whilst growing to become more diversified, sophisticated and institutionalised.”
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