Alternative Finance Grows Over 100% In 2014

Nesta, an independent UK based charity that is tasked to increase innovation, recently published a report which predicts that the domestic alternative finance market will represent £1.74 billion of value by the end of the year. This will represent 161% growth year on year.


In addition, the research predicts that the alternative finance market will more than double in size in 2015 to over £4.4 billion pounds. 


Barry Zhang, co-author of the report said: “2014 has been a phenomenal year for the industry and this record-breaking growth is set to continue into the next year and beyond.


The report, “Understanding Alternative Finance – The UK Alternative Finance Industry,” assesses activity over a range of different markets including P2P business lending, equity crowdfunding, invoice trading and rewards crowdfunding. In spite of growth across the sector, there is still a huge opportunity for alternative finance to grow as the Nesta survey revealed that currently only one in nine businesses, and one in seven consumers have used crowdfunding or invoice trading platforms. 


Nesta’s report, written in conjunction with Cambridge University, incorporated a number of different research techniques including surveying over 15,000 users of alternative finance platforms, alongside over 500 small and medium sized businesses.


At Crowd2Fund, the report's findings are hugely encouraging to us due to our platform covering a range of these markets. At present our service incorporates equity, debt, reward and bond crowdfunding services. We will soon be adding philanthropy to this list.


All sectors of the market are growing but at varying speeds. Equity crowdfunding, representing a value of £84 million, is the fastest growing, and has increased 410% year on year since 2012. This is not surprising given the co-operation of the FCA, which has allowed this part of the industry to flourish. Crowd2Fund has been working closely with the FCA over the past year, and in October became fully approved by the FCA.


One additional benefit of equity crowdfunding is that it is assisting economic growth by creating new jobs. Nesta’s research paper indicates that 60% of companies who raised via this method employed new staff members subsequent to a successful raise. 


The largest slice of the market is taken up by P2P business lending. In 2014 this is forecast to reach £749 million. This represents 43% of the total market. This activity is indicative of a wider trend of businesses being turned down by banks and turning to alternative lending platforms. In addition, the growth of such platforms has been aided by savvy consumers choosing to seek a higher rate of return on their capital rather than storing the money on deposit in a traditional bank.


At Crowd2Fund, it is our belief that the growth of P2P business lending will grow exponentially from April 2015, when the Government are expected to allow investors to hold P2P debt products within their ISA portfolios. 


In addition, we believe that as Britain’s economic fortunes increase, businesses and consumer will continue to embrace alternative finance. This is due to a wider shift of finance becoming more democratic, and businesses realizing that borrowing money or raising capital from platforms has a number of ancillary benefits.


The Nesta report is available to read in full at the following link: http://www.nesta.org.uk/alternative-finance

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Investments like these involve risks including loss of capital. Please see our risk section before making an investment decision