Peer-to-peer lenders 'could break banks' stranglehold'

Peer-to-peer lending (P2P), a mechanism that links debtors and lenders directly without the intermediary input of traditional sources of finance (like banks), could account for 15% of the SME lending market if untapped demand is realised, says Nesta.

The charity collected data from Funding Circle, which has facilitated £93.5m worth of debt between small businesses and investors, predicting that P2P lending has the potential to provide £12.3b in loans. 

Although Nesta found that awareness of P2P lending is lacking amongst small businesses, bank sourced finance has been difficult for SMEs to obtain – net borrowing from banks fell by £2.4b in Q4 2012 highlighting. If the Government’s Funding for Lending Scheme fails to stimulate lending then P2P debt might fill void.

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