Alternative finance platforms: an economic success story

Alternative finance continues to go from strength to strength: so what does the future hold and how will the high-street banks react?

According to Companies House reports, a record breaking 581,173 new businesses were created in 2014. What will the statistics look like for 2015 – as the UK has moved firmly out of recession?

It’s a well-known fact  that small businesses are no longer turning to banks for financial support – many know they will either fall at the first hurdle, or they will struggle later down the line.

With this in mind, where are all the budding entrepreneurs going for funding and start-up support? For so many, the absence of financial support at this crucial stage can mean the difference between success and failure.

Well, at the same time as there has been a rise in the number of start-ups year-on-year, there has also been a proliferation in the number of new platforms offering alternative sources of finance for start-up entrepreneurs and SMEs.

P2P lending platforms represent probably the most successful form of alternative funding; with this sector seeing a real explosion. As at the end of June 2015, the cumulative total lent by P2P business lenders in the UK stood at £3,844,071,213 (1), meaning that the sector is on track to lend £4.4 billion (2) by the end of 2015, as has previously been forecast by Nesta.

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There is no doubting that the alternative finance industry is fast becoming an economic success story. Like John Allan, the national chairman of Federation of Small Business, I put this mainly down to the speed of turnaround these platforms can provide.

Getting fast access to finance can mean the difference between succeeding and not. Entrepreneurs don’t want to miss the boat; they want to grasp every available opportunity – from day one.

The Route – Finance has a similar but distinctly different model to most P2P platforms, in that it does not market to the public via an online portal, but rather to a closed network of high net worth, sophisticated investors. 

These individuals are all members of The Route – City wealth club who mandate funds to the platform in advance.  This allows the Route to move very swiftly once a suitable proposal has been identified and it means that the borrower has a very high degree of certainty that the funds will be available when needed.

As such we have also seen our pipeline of requests for finance increase incrementally throughout 2015. We are currently working on proposals representing a total of £35 million – for a range of UK SMEs. This is more than double the number and volume of serious enquiries for the same period in 2014. And the enquiries are increasing in both volume and quality – providing a real market indicator.

>Related: Capify looks to fill ‘void’ in SME finance market

It will be interesting to see how the market evolves over the coming months and years, and to compare this with performance and response of the UK’s high street banks.

Director and Founder of The Route, Richard Admiraal, has recently written a book entitled, ‘Be The Bank – How To Earn High Returns Securely By Lending To SMEs’ – directed at private investors and business owners and directors.

The book provides readers with knowledge and understanding of how to invest in small business and also why the need to invest has arisen. It looks at what SMEs are, how The Route – Finance works for SMEs and investors, and how to understand asset based financing.



Further reading: Five ways to give your crowdfunding campaign a boost

Praseeda Nair

Praseeda Nair

Praseeda was Editor for from 2016 to 2018.

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