Why Alternative Finance is increasing market shareFeb 1, 2019 Blog Alternative Finance
The Route – Finance recently published an article about the growth in the Alternative Finance sector. In the article, they admitted that the “dizzying growth of the early years” has slowed to more sustainable growth but said that is expected in a maturing market. However, Alternative Finance provides continue to increase their market share, even though businesses still have access to traditional funding options.
2017 was the 7th year of ‘substantive market growth’ according to the Cambridge Centre for Alternative Finance’s latest report, with Alternative Finance providers channelling £6.9bn to business. The report states that “Alternative Finance is now well established as a funding source for SMEs”. Market share of platform lenders rose from 0.3% in 2012 to 9.5% in 2017, so even though banks are taking a positive approach to lending to SMEs, many of them are looking at Alternative Finance as an option.
If you are wondering why this the case, these might be possible reasons:
Greater awareness – initially there were only a few early adopters, but Alternative Finance products have become much more known to brokers and businesses. There is however a lot of education still required to business owners and an increasing number of brokers are set out to do just that.
User friendliness – most platform lenders started because they wanted to challenge the status quo. They wanted to disrupt the market and do that effectively, in order to offer something that traditional lenders were failing to do. The result of this is typically easy and transparent online application processes and a relatively fast ‘yes’ or ‘no’. This is crucial to businesses and often suits the way they work.
Specialisation – platform lenders initially offered mainly term loan with interest rates based on risk and the amount borrowed. Today there are more options, like sector based (property for instance), or ‘special situations’ based (some platforms offering situations lending that fall outside the risk criteria of traditional banks), or special products (like invoice trading).
The ability to meet the changing needs of businesses will be the key to the continuing growth of Alternative Finance, and players in the market are continuing to innovate.
Watch this space!
For the full article at The Route – Finance, click here.