UK SME lending: Optimism backed by strong growth

On Thursday I’ve visited the FinTech50 launch event and on Friday the inaugural Alternatives & Receivables finance conference. I was focused on the state of SME lending in the UK, and below are some of my reading between the lines: 

Platforms is still all the rage but mostly because of mistrust of banks. The interesting point was that platform operators like Funding Circle and MarketInvoice will be the first to say that a very substantial chunk of their funding is now done by institutional money, and not retail investors (similar structure to other balance sheet lenders). So it’s about mistrust of banks more than the actual people to people element of the platforms.

Alternative lenders are doing a good job with debt issuance growing double digits in the last six months

Alternative lending is a niche play lenders typically focused on specific sizes (e.g. <50k loans) and specific types of lending (e.g. factoring). This might be a testament of how young the industry is, with lenders till a one product companies.

MarketInvoice and Funding Circle clear leaders and both seemed to have developed strong origination capabilities. Of those, MarketInvoice is the more interesting player because in addition to disrupting traditional banking, they go against factoring where they offer one off invoice discounting vs. factoring’s whole ledger structure. Sounds like the big factorers, such as Bibby, are slow to adapt

Recent capital market turmoil hasn’t impacted optimism. Maybe it’s the forum, but no talk of the implications of Aldermore’s pulled IPO, and Virgin Money’s decision to postpone theirs from last Friday. Lenders see growth prospects for their businesses, and no issues with access to capital to lend