Alternative finance is exploding

The sector will be worth £1.74bn this year - 161% more than 2013.

by Rachel Savage
Last Updated: 20 Feb 2015

Alternative finance is having a moment right now. The sector - covering everything from peer-to-peer lending to crowdfunding - is expected to grow 161% to £1.74bn this year, according to a new report by ‘innovation charity’ Nesta and Cambridge University. Back in 2012 that figure was just £267m.

Peer-to-peer (P2P) business lending represents the biggest chunk of the market - £749m worth of loans is expected to flow through those platforms this year. Unsurprisingly, it’s seen as pretty ripe for the picking by venture capitalists - Funding Circle, whose revenues grew 177% to £5.3m in 2013, raised $65m earlier this year.

P2P consumer lending is the next biggest category - Nesta forecasts those loans will be worth £547m. Following that is invoice trading (selling invoices rather than waiting for tardy customers to pay up) at £270m. Market Invoice, one of the biggest players in that field, said in September it had funded almost £150m so far this year and had faciliated £250m-worth since setting up in 2011.

Source: Nesta/University of Cambridge

All of them are growing quickly, but it’s equity crowdfunding (giving lots of people the chance to buy up a small slice of your company) that’s exploding the fastest, up 410% year-on-year since 2012. It seems reasonably successful for small businesses to - the average amount raised was just shy of £200,000, while 70% of companies using it increased their turnover and 60% their staff.

The sector is still tiny - Barclays’ total loan book was worth £483bn at the end of September. But, at this rate, alternative finance won’t be so ‘alternative’ for much longer.

Find this article useful?

Get more great articles like this in your inbox every lunchtime

C-Suite parents share working at home tips

For many people, the home office is now also a home school.

How to manage remote teams (without becoming a Zoom pest)

Briefing: Former Waitrose boss Mark Price says managers will need to think about how they’re...

Could coronavirus lead to gender equality?

Opinion: Enforced home-working and home-schooling could change the lives of working women, and the business...

Mike Ashley: Does it matter if the public hates you right now?

The Sports Direct founder’s response to the COVID-19 pandemic has drawn criticism, but in the...

4 films to keep you sane during the coronavirus lockdown

Cirrus CEO Simon Hayward shares some choices to put things in perspective.

Pandemic ends public love affair with Richard Branson et al

Opinion: The larger-than-life corporate mavericks who rose to prominence in the 80s and 90s suddenly...