Understanding Alternative Finance

Say 'financial innovation' and what comes to mind for many is the investment banks and complex products that were at the centre of the financial crisis. Yet in recent years we’ve seen the term become associated with a new type of finance provider, those businesses and online platforms gathering under the banner of alternative finance.

Inwius - Understanding Alternative Finance Article

Finance models such as crowdfunding and peer-to-peer lending are at the heart of this as they harness internet technologies to bring those with money and those who need it closer together and aggregate numerous small investments or donations to meet large funding needs. Businesses, community groups and individuals are using this industry to either get funding they cannot access elsewhere or to get it quicker and on better terms.

  • The alternative finance market is expected to grow to £1.74 billion

  • The market grew by 150 per cent from 2012 to 2013 and is on track to grow by 161 per cent from 2013 to 2014

  • It is expected that the UK alternative finance market will have provided over £1bn of growth and working capital to an estimated 7,180 SMEs, equivalent to 2.4 per cent of bank lending to businesses by the end of 2014

  • 70 per cent of SME borrowers using P2P business lending have seen their turnover grow since secured funding with 63 per cent of them recording a growth in profit

  • Alternative finance is providing significant additional giving to social good projects, with more than three in four backers of projects with a social focus using funds in addition to what they would normally give to charitable causes

  • One in seven of UK consumers have used at least one alternative finance model

  • Less than 10 per cent of UK SMEs have used at least one alternative finance model to raise funds

  • Equity-based crowdfunding is now worth by £84 and is the fastest growing market, with an average growth of 410 per cent

  • P2P business lending, which has seen an average growth of 250 per cent, is the largest individual alternative finance market, with estimations being that by the end of 2014 it will have facilitated loans worth £749 million

Article Facts and Figures Reference: http://www.nesta.org.uk/

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