Britain’s alternative finance market is set to surge to almost £2 billion over the next 12 months, according to new research.
After growing 150% between 2012 and 2013, then on track to show mega-growth of 161% this year, alternative finance experts are predicting the sky’s the limit as the sector moves into the main stream for businesses.
Alternative finance covers a range of funding, from the government-promoted Seed Enterprise Investment Scheme (SEIS) to crowdfunding and peer to peer lending.
All are taking off in popularity as entrepreneurs seeking cash backing are shunned by the banks and have to look elsewhere for borrowing.
The research, by charity NESTA, which aims to help businesses and individuals develop innovative ideas.
The study highlighted that the equivalent of more than 7,000 small businesses will have borrowed £1 billion from alternative finance sources by the end of 2014 – equivalent to 2.4% of high street bank commercial lending.
The report also found:
- 70% of business borrowers with peer to peer borrowing have seen turnover climb since they gained funding, and two-thirds showed a record profit increase
- Alternative finance is proving popular with social projects with three-quarters of investors giving more to social and charitable causes than ever before
The figures come from NESTA’s study aimed at helping investors and entrepreneurs understand alternative finance.
“Alternative funding gives people a new way to control over their cash and investors a new way to help businesses or donate their money to a good cause,” said a NESTA spokesman.
Alternative funding lifeline
“Meanwhile businesses, charities and community groups that would otherwise never have had the chance to raise money for their projects secure the cash they need to make their ideas work.
“Everyone wins and the huge increase in interest in alternative funding has a positive effect on the economy as well as helping social and philanthropic causes.”
The NESTA report puts alternative funding under the microscope and looks in detail at how the market works, who benefits the most and where to find the money.
“The market is outstripping data about who is borrowing, why and how much, so this report is a useful tool for investors and those seeking funding to find out more about alternative finance and how it works,” said the spokesman.