The £1 bn finance sector that’s no longer alternative

ALTERNATIVE finance businesses, which find backers for small companies that can’t get bank support, are almost doubling every year, having reached a £1billion milestone for lending in 2014, according to one of the industry’s leading figures.

Louise Beaumont, founder of Platform Black and now head of public affairs at AIM-listed GLI Finance, said the sector was so big it may even have to change its name.

‘If 2014 was the year that alternative finance came of age, then 2015 is the year that it will finally shake off its prefix of being alternative,’ Beaumont said.

She added: ‘The industry has evolved at a rapid rate with the estimated size of the UK alternative finance market in 2014 at £840million and the year on year growth rate at a staggering 90 per cent.

‘Although the proportion of annual UK business lending provided by alternative finance is still a drop in the ocean at 2.4 per cent, it is this sector which is incubating the businesses fuelling our economy – the small and medium-sized enterprises.

‘The Chancellor’s acknowledgement in the Autumn Statement that investors can now offset any losses from alternative finance platforms against income from other such loans will bring peer-to-peer loans [lending directly from one company or individual to another] in line with other more traditional investments.

‘We also predict that the regulation of the industry will become consistent.

‘The new year will see banks reaching out further to the sector and acknowledging their place within it. GLI Finance is already supported by Barclays, which holds a 3 per cent equity stake, and FundingKnight, part of the GLI Finance family, has been approached by a foreign bank to use its platform as a more efficient way of originating SME loans.’

Beaumont added: ‘There is no doubt that the demand for alternative finance will grow dramatically in 2015 as more and more SMEs realise the potential and benefits of alternative finance providers.

‘This global surge is already happening. The Bank of England’s Funding for Lending figures already reflect this shift with 2014 figures showing a decline by £400million of bank lending to SMEs against an estimated £1 billion in business finance to more than 7,000 small and medium-sized businesses within the UK alternative finance market.’

GLI Finance itself has 16 different alternative finance platforms including Platform Black.