Is Bank of England looking at the wrong numbers for SME lending?

BoE reported last week that the value of outstanding SME loans has fallen once again – bank loans now continuously falling for five years! Yet, alternative funding is booming.

We hear from our partners that they have lent to date as much as in all of 2014. The sentiment is reflected in the Liberum AltFi index which reports business P2P lending growing 140% and invoice finance 80% YTD. The different perspectives on the state of SME lending lays bare the increasingly rapid shift from traditional to non-bank lenders.

Banks used to provide 95% of funding to small business. Today, this figure is closer to 80%, as more businesses are taking control of their funding needs. They are coming to FUNDING XCHANGE not because the banks won’t lend to them, but because they want the flexibility and decision making on funding in days, rather than weeks or months.

This shift in attitude by business owners is the last of the critical pieces that needed to fall into place. We believe the UK market is now poised to quickly catch up to the US alternative funding sector which provides 50% of all SME funding.