Small Businesses Reject Banks in Favour of Alternative Finance
London businesses raised an estimated £350m through P2P lending in 2015 while data shows value of bank loans and overdrafts dropped 40%
New research has found that London-based small and medium-sized businesses are increasingly looking towards alternative finance with traditional bank lending plummeting.
Research conducted by the British Bankers’ Association show that the value of all newly approved loans and overdrafts to small businesses in the third quarter of 2015 was down 40% on 2014 totals, from £1.7bn to just over £1bn.
Instead, companies are looking towards alternative sources such as crowdfunding or peer-to-peer (P2P) lending to raise finance.
Businesses in the capital raised an estimated £350m through peer-to-peer lending in 2015 with the average loan value approved for smaller businesses rising to over £86,000 across July to September 2015.
The average value for medium-sized businesses was £366,000.
Roz O’Brien, director of Pixel Projects, believes banks are often too slow for certain businesses’ needs: ‘’The tech sector works quickly and efficiently, it’s a fast-paced environment; and our funding setup needs to reflect that. We can’t wait on a banks’ response to a funding application.’’