Finance · 19 October 2016

British entrepreneurs increasingly turning to alternative finance

Alternative finance now takes 12 per cent of the total lending market

A growing number of Britons are looking at alternative finance opportunities in order to fund new enterprise, a study has shown.

The survey from private equity house IW Capital looked at the interest from UK consumers and investors in the government’s Enterprise Investment Scheme (EIS).

The scheme provides a range of tax relief benefits for people looking to invest in shares in companies that qualify for the scheme.

Some 30 per cent of respondents claimed that EIS formed part of their financial strategy over the next year, in light of the Bank of England setting the lowest interest rates in British history in August.

The study also documented the rapid growth of alternative finance in Britain. In 2015, the sector grew by 84 per cent and facilitated a total of £3.2bn in investments and loans for British companies – 12 per cent of the total lending market for small firms in the UK.

Since launching in 1993, investments made through EIS have been worth £14bn to small businesses in the UK. The growing enthusiasm for the scheme and alternative finance as a whole suggests a positive outlook for small UK business owners seeking investment.

The findings also revealed that Londoners were the most likely to use EIS in the next 12 months, with 45 per cent of residents in the capital considering taking advantage of the scheme.

Despite a general lack of awareness of the scheme across all regions and demographics – 43 per cent of respondents said that they needed to become more informed in EIS before investing – the younger generation of Britons were found to be the most enthusiastic about the prospects of using low interest rates to buy shares, as 38 per cent of 18-34 year olds were looking to use the scheme.

Commenting on the findings, CEO of IW Capital Luke Davis highlighted the new opportunities that alternative finance had provided investors, with the knock-on effect directly supporting the prospects of small businesses in the UK.

Davis said in a statement: “Britons are turning to alternative finance.”

“This is great news for the UK’s collection of 5.4m SMEs. This scheme has become a vital part of the SME finance landscape,” he added.

Read on to find out 13 fast and flexible alternative finance options for small businesses.

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Simon Caldwell is deputy editor at Business Advice. He has a BA in politics and communications from the University of Liverpool, and has previously worked as a content editor in local government and the ecommerce industry.


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