This report looks at the emerging field of peer-to-peer lending to businesses, using proprietary data from Funding Circle.

Key findings:

• The average lender has lent a total of £8,000 to 67 companies through Funding Circle.
• Should the model continue to gain traction with potential lenders, up to £12.3 billion worth of business lending could be facilitated through the peer-to-peer model each year.
• The average size of the loan raised by the surveyed companies is £35,000 and the average number of people that lent money to each company is 418.
• Sixty per cent of the companies in the sample attempted to secure a bank loan before approaching Funding Circle, and thirty-two per cent said that without Funding Circle, it is likely or very likely that they wouldn’t have received external finance.

As banks retrench in the wake of the financial crisis, small businesses have found it increasingly hard to access the finance they need to grow. But there is some cause for optimism.

New providers of business finance are stepping into the space left by banks, and are devising innovative business models, often taking advantage of new technologies and different sources of capital.

One such model that has grown rapidly in recent years is peer-to-peer financing.

This report seeks to cast some light on the emerging field of peer-to-peer lending to businesses, using a large set of data collected through Funding Circle, the largest peer-to-peer business lending site in the UK.

Funding Circle has facilitated approximately £100 million in loans to over 1,700 companies to date (as of April 2013).

Authors

Yannis Pierrakis and Liam Collins