Alternative finance sources like crowdfunding and peer to peer lending will have raised £1.74 billion in finance by the end of this year, indicating fundraising will more than double by the end of 2015 to £4.4 billion.
This would continue the annual growth rate of 250%, according to research from the charity Nesta and the University of Cambridge.
Peer to peer lending is the most popular in the alternative finance sector with £749 million raised for companies with no signs of slowing down. Peer to peer lending lets businesses and investors lend directly to other businesses, also known as loan-based crowdfunding.
More than half of consumers surveyed in Nesta’s report said they were aware of a type of alternative finance while one in seven has used crowdfunding or peer to peer lending to raise funds.
It is no surprise crowdfunding and more alternative sources of finance are becoming popular within the business community compared to traditional banking. Looking at the research, Nesta’s Liam Collins said “These findings shed light on a growing movement that is revolutionising banking, investing and giving by using technology to simplify the links between those who want to invest money and those who need it. With bank lending to SMEs down again this quarter, it’s no wonder that alternative finance is fast becoming an important source of funding for individuals, businesses and organisations who struggle to access finance elsewhere.”
In fact, 70% of businesses that have used peer to peer lending have actually seen their turnover and profits grow.
This can only be a good thing for small businesses as more options are available for those in need of finance quickly. This means many struggling firms now have a greater chance of survival if the finance is to improve cashflow and help the business move forward.
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