"Financing projects from £50,000 to £100 million"

Peer-to-peer platforms could alleviate lending shortfall

Peer-to-peer platforms could alleviate lending shortfall

Online peer-to-peer lending platforms could be the way out of a severe lending shortfall for small businesses, a new report will say this week.

Peer-to-peer lenders allow savers looking for better returns on their funds to reach lending agreements with entrepreneurs and small-business owners that have been shut out by banks.

A study by Nesta, a charity which focuses on innovation, believes that social lenders could account for at least 15% of all lending to small and medium-sized businesses if they were able to absorb and fulfil the demand of companies and savers to improve conditions for themselves.

Nesta’s report looked at data involving 89 companies and 600 investors using businesses P2P lender Funding Circle, which has processed £93.5 million in loans, including £10 million in the past month alone.

The government has also pledged £20 million to the fast-growing lender as it seeks progressive solutions to the lending shortfall in business finance.

Nesta estimates that Funding Circle and similar peer-to-peer lenders could provide over £12 billion in loans if they absorb the demand. This would constitute around 17% of the total lending currently delivered through mainstream banks (c. £70 billion), and a little under 15% of the entire market if the two loan totals were combined.

Funding Circle is certainly aware of the opportunity and has already gone on record with a more ambitious proposal than that proposed by Nesta by stating that it could provide up to 20% of all SME funding within as little as five years (read more).

Monday, 15 April 2013 12:49
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