As small businesses continue to find the banks unwilling to lend, or find themselves priced out of traditional finance options through increasingly steep collateral demands, the alternative finance market is starting to become more popular amongst SMEs. This includes options such as invoice finance, one of the most established forms of alternative business funding on the UK market. Other options include peer to peer lending, which has received a boost from recent figures showing more people are likely to consider such a lending and investment option.
According to new research, one in four people in the UK would consider loaning money to small businesses through peer to peer lending. This is however dependent on the sector being fully regulated, which at present is not the case. However, by 2014, it will be fully regulated by the Financial Conduct Authority, making it a more viable option for both businesses and potential investors. The added security from the FCA should make peer to peer lending a better option, protecting investors from losing their money if borrowers default.
Peer to peer lending is the practice of lending money to businesses or individuals online, often in relatively manageable quantities for investors. Individual lenders can typically earn up 8% from P2P platforms, making them an attractive option – at least, once the regulation of the sector has been straightened out.
This study also shows that around 24% of small firms believe they will struggle to secure finance over the next 12 months. Given this figure, 16% would consider applying for P2P lending over the next year.
Peer to peer lending looks like it could continue to grow with the new regulations in place. However, if your business is looking for flexible, accessible and affordable finance, then invoice factoring is a great option available now.