According to a report by the Cambridge Centre for Alternative Finance, the British alternative finance industry “has grown by 43% over the last year to £4.6 billion”. In 2015, the industry was worth £3.2 billion, and just £0.31 billion in 2011.
The Entrenching Innovation report is the University of Cambridge’s fourth on the alternative finance industry. It discusses how the market is gradually becoming a more favourable option for businesses tired of banks’ legacy systems, and breaks down the demographics involved.
Peer-to-peer lending (both property and consumer) topped the results, accounting for £3.5 billion. This was followed by invoice trading (£452m), equity crowdfunding (£272m), property crowdfunding (£71m), and reward-based crowdfunding (£48m).
SMEs Benefit from 72% of Alternative Funding
The largest segment of funding – £3.3bn – benefited small businesses and startups. “It’s estimated that 33,000 firms utilised various debt, equity or non-investment based alternative finance channel”, which is 2.5% of the UK’s total employers.
According to the British Banking Association, alternative platforms now account for 6.56% of new loans for SMEs.
Some Platforms Can’t Keep Up with the Industry
As the sector grows, some smaller brands are struggling to compete and there are “fewer new entrants into the market”. 35 online alternative platforms closed in 2016-2017, some have merged with competitors, and 59% significantly altered their business model to keep up with the demand for adaptation.
The market continues to consolidate itself, which has clearly highlighted the front runners that make the most profit.
The North West is the Most Active Region Outside of London and the South East
London dominates the alternative finance industry, as it’s home to 44% of platforms. The South East follows with 16%, and 9% have set up their HQ in the North West of England. Only 4% are established in Scotland, and Yorkshire, the North East, and West Midlands are home to just one alternative finance brand each.
In terms of receiving funding, the North West, South West, and South East receive the largest quantity of available funding out of the 11 total regions. Yorkshire & Humber and the West Midlands rank in 5th and 6th place, and the East Midlands and East of England receive the least.
Multiple Sectors are Benefiting from Alternative Finance
Most alternative funding methods have been popular with technology, finance, real estate, and community/social enterprise businesses. Debt-based security has been a favourable choice for the food and drink industry, and donation-based crowdfunding is a hit with art, music and design businesses.
Capify is an alternative finance provider making business funding simple. Businesses can raise between £3,500 and £500,000 depending on their monthly turnover, and repay it gradually as money comes into their business.Get A Quote