The UK alternative finance market grew by 35% to £6.2 billion in 2017, with P2P and crowdfunding accounting for 30% of all deals, according to a report by Cambridge Centre for Alternative Finance.
Peer-to-peer business lending retained the top spot, with £2 billion in transaction volume in 2017 and 65% year-on-year growth, estimated to be equivalent of 29.2% of all new bank loans to small businesses in 2017. That's nearly double the 15.3% figure in 2016.
Consumer lending in the P2P space commanded £1.4 billion, with property lending standing at £1.2 billion and invoice trading at £787 million.
Equity-based and real-estate crowdfunding platforms also had a stellar year, with the former growing by 22% year-on-year to £333 million, and the latter hitting 200% y-o-y growth at £200 million.
But debt-based securities stagnated at £79 million, while rewards-based models decreased by £4 million to £44 million in 2017.
Institutional financing helped propel the figures, accounting for 40% of funding for P2P business lending. This trend of institutionalisation was also seen in equity-based crowdfunding, where 49% of the funding was provided by venture capital funds and professional investors “co-investing” with retail investors.
The CCAF also asked UK online alternative finance platforms to provide an indicative breakdown of their operating costs and budget allocation, finding that on average and across models, they spend about 15% on IT, 14% on research and development, 14% on sales and marketing, and eight per cent on reporting and compliance.
Bryan Zhang, the executive director of the Cambridge Centre for Alternative Finance says: “This report reflects an industry that is playing an increasingly important role in helping consumers and businesses access finance, whilst growing to become more diversified, sophisticated and institutionalised.”
Bruce Davis, director of the UK Crowdfunding Association adds: "As we move into uncertain times with Brexit discussions ongoing, the UK will need to ensure its home-grown providers of investment capital can keep providing vital investments to grow businesses and improve the UK's productivity and international competitiveness. We hope that policy makers and regulators alike will think about ways that they can further support the growth of the industry as it matures and diversifies further.”