Peer to Business Lending
Alternative Finance Sector Report - October 2014 7
PEER TO BUSINESS LENDING
ALTERNATIVE FINANCE SECTOR REPORT
PUBLISHED
November 14
AUTHOR
Luke Jackson
Samantha Goins
Size and Growth of the UK Peer-to-
business Lending Market
13
2011 - £21m
2012 - £62m
2013 - £193m
Average Annual Growth Rate – 203%
According to a report by Nesta, £193m
was raised through P2B platforms in the
UK during 2013. This is an annual growth
of 211% compared to 2012 and means that
over the last 3 years the amount raised
has increased by an average of 203% per
year.
14
The UK is by far the global leader
in raising finance for small businesses
through P2B lending. According to
the Liberum AltFi Volume Index, which
tracks the monthly fundraising through
a number of P2P and P2B platforms, the
P2B lending sector continues to have
the strongest performance with growth
increasing by 10.4% (month on month) in
June and 14.74% in July.
Despite the large rate of growth and
record amounts raised through this
channel over the last few years, P2B
lending accounted for less than 1% of the
total amount lent in the SME market. At
the current rate of growth the P2B market
should break through the 1% barrier by
the end of 2014.
15
Despite currently
accounting for a very small piece of the
pie, the current growth rate suggests
that it’s not long before P2B becomes an
important player in the SME financing
market. Over 5,000 businesses have been
funded by alternative finance providers
over the last 3 years and they will agree
that financial innovation is starting to
deliver real value to the UK economy.
16
Assetz Capital, LendInvest and Wellesley
have been dubbed the “challenger” P2B
firms
17
with cumulative lending volume
comparable to the current sector leader
Funding Circle. Assetz Capital saw 24.97%
month on month growth in the volume
of lending in June 2014, with £7.38m
worth of loans originated.
18
Having a
number of strong, high performing firms
in this sector is one of the reasons for the
continued growth and high volume of
fundraising through P2B lending. It should
be noted that LendInvest and Wellesley
are not pure P2B lenders as they do not
just utilise investors’ money. LendInvest
allow institutional investors to access
loans directly through their platform, and
are introducing technology onto their
platform to better service institutional
investors.
19
Wellesley invest their own
money first and invest alongside investors
into projects – this means that they will
have a vested interest in the success of
loans, but could also mean there is a risk
that they privately fund the very best
deals themselves rather than make them
available to the general public.
A survey by Funding Circle of 630 of their
lenders and 89 borrowers, found that on
average, businesses borrowed £35,000
(from 418 people) at an interest rate of
8.2%.
20
Some interesting findings from this
research:
77% of businesses that had borrowed
money through Funding Circle would
consider them first when looking for
finance in the future;
Typical lenders are identified as male,
relatively wealthy and have a science,
business or finance degree;
On average they have lent £8,000
across 67 companies and have a financial
wealth in excess of £80,000;
Financial return is the main motivation
with the interest rate offered and risk
rating of the business as the main factors
influencing lenders’ decisions
A further survey has been conducted
by Assetz Capital of their current client
base to assess their views, motivations
and experience of P2B investing. The
full results of this survey are included in
appendix 1. Over 530 clients responded,
393 (73%) of which have previously
invested through the Assetz Capital
platform.
The majority of respondents (171) have
lent £1,000-£9,999, 128 lent £10,000-
£99,000 and 24 have lent more than
£100,000 each through the platform
Nearly 50% of respondents (191) hold
between 1-9 loans, 120 hold between 10-
19 loans and 9 people have invested into
over 40 loans
Nearly 90% (341 investors) started
by investing a small amount through
the platform, and then increased their
allocation as they went along
250 respondents cited security as
the most important consideration when
considering a specific investment through
the Assetz Capital platform
The majority of investors (217) consider
themselves to have a balanced approach
to investing
Over 75% of respondents (297) use
other platform services similar to Assetz
Capital
For respondents that haven’t yet
invested through Assetz Capital, 66%
(82) would use an automated investment
model based on pre-selected criteria
13 - Nesta: The Rise of Future Finance • 14 - Nesta: The Rise of Future Finance • 15 - Nesta: The Rise of Future Finance • 16 - Nesta: The Rise of Future Finance • 17 -
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altfi.com/data/analysis/338 • 18 -
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