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Let's Talk Business

As Bank Loans Fall, Small Businesses Turn To New Source Of Lending

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• NEW REPORT HIGHLIGHTS SMALL BUSINESSES ARE TURNING TO ALTERNATIVE FINANCE AS BANK LENDING FALLS

 

• 45,000 JOBS POWERED BY LOANS FROM INNOVATIVE FINANCE PLATFORM FUNDING CIRCLE IN 2017

 

• £2.4 BILLION CONTRIBUTION TO THE UK ECONOMY UNLOCKED OVER THE LAST YEAR BY LENDING THROUGH THE ONLINE PLATFORM

Economic and political uncertainty has undoubtedly dented the confidence of small businesses in Britain, and with bank loan applications falling a new publication shows that such firms are turning to alternative lending opportunities. 

 

The Economic Impact of Lending Through Funding Circle Report – published by Oxford Economics – indicates lending through the global small business loans platform unlocked 45,000 jobs in the UK in 2017.

 

NEGATIVE LENDING

Small businesses – private firms with fewer than 250 employees – make up around half (50%) of UK Gross Domestic Product (GDP), and 60% of private sector employment2 yet continue to face difficulties accessing finance through traditional channels. In the last quarter of 2017, the combined net lending - total lent minus payments and repayments - of the major high street banks to small businesses was negative (-£73 million).

BRANCH CLOSURES

These difficulties have been exacerbated with the closure of an estimated 423 bank branches across the UK in 2017.3 Yet despite this, the number of small businesses here has grown suggesting an increase in the number of enterprises turning to innovative alternative finance for lending. 

ECONOMIC GROWTH

These platforms are reporting year on year growth. In the same quarter of 2017 that bank net lending was negative, Funding Circle investors lent £155 million to small businesses on a net basis alone.2 As a result, the firm will be creating 200 new jobs this year in Britain, taking their global workforce to 1,200.

From butchers and bakers to IT consultants and accountants, the number of ‘business births’ – businesses that were established in recent years – has grown with 414,000 firms in Britain being established in 2016, an increase of 15%, compared with 383,000 start-ups the previous year, and 351,000 in 2014.4

Joining us in the studio is Financial Expert Natasha Jones from Funding Circle to discuss the report and the impact that innovative alternative finance is having on businesses in the UK. 

Let's Talk Business: As bank loans fall, small businesses turn to new source of lending.

Biz spoke to Natasha Jones from 'Funding Circle' on the new source of small business lending