This large scale study examines the growth, trends and dynamics within the UK alternative finance sector, including crowdfunding and P2P lending.

Key findings

• In 2014 the alternative finance market is expected to grow to £1.74 billion.
• The market grew by 150 per cent from 2012 to 2013 and is on track to grow by 161 per cent from 2013 to 2014.
• It is expected that the UK alternative finance market will have provided over £1bn of growth and working capital to an estimated 7,180 SME equivalent to 2.4 per cent of bank lending to businesses by the end of the year.
• 70 per cent of SME borrowers using P2P business lending have seen their turnover grow since secured funding with 63 per cent of them recording a growth in profit.
• Alternative finance is providing significant additional giving to social good projects, with more than three in four backers of projects with a social focus using funds in addition to what they would normally give to charitable causes.

As highlighted in this report, the UK market is growing rapidly, and has more than doubled in size year on year from £267 million in 2012 to £666 million in 2013 to £1.74 billion in 2014.

In the process, it has given individuals more control over their money as well as new outlets to invest or donate it. At the same time entrepreneurs, SMEs, charities and community organisations are obtaining much–needed finance, which in many cases they would not otherwise be able to secure. It is evident from our research that the alternative finance market is contributing to the growth and vitality of the UK economy as well as having a positive social impact on philanthropic giving and volunteering.

However, while the market is racing ahead, growing in the number of individuals and ventures funded, the amount of total finance raised, and the number of businesses operating in the alternative finance industry, research has lagged behind. Beyond the size and growth of the market, we actually know very little about alternative finance and the people who are using it to fund or fundraise for projects and ventures.

This report sheds a light on what is a fast growing and highly diverse market, and looking beyond the growth of the market, explores in detail:

• What type of people and organisations use the different alternative finance models?
• Why people and organisations seeking money turn to alternative finance platforms?
• What makes a model attractive to people with money to donate, lend or invest?
• What the socio–economic impact of alternative finance is and how organisations and businesses perform in the short term after fundraising on alternative finance platforms.
• How people find out about various alternative finance models and what they think of them having used them.

Authors
Peter Baeck, Liam Collins and Bryan Zhang