P2P Players Are Doing Their Bit to Fill the £4bn Business Funding Gap

The funding gap of £4.3 billion is holding back the UK’s small and medium-sized businesses (SMEs) and preventing economic growth. While the BoE decision last week to hold interest at .25 per cent cheered borrowers, most experts agree that the UK financial services industry also still needs to step up and create a stronger environment for business lending.

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By keeping interest rates at their current level The BoE is trying to reduce the severe challenges SMEs face when trying to access finance. Alternative finance providers are bringing innovation to the industry but last week Kevin Caley, chairman of peer-to-peer (P2P) business loans’ lender, ThinCats, called on bigger lenders to play their part.

“There is currently a £4bn annual business funding gap in the UK and while alternative finance sectors such as P2P are helping to chip away at this huge deficit, the UK needs a collaborative effort from government and industry to oil the gears that give SMEs access to the finance they need to grow. The UK’s biggest lenders should also take steps to improve borrowing conditions.” Caley said.

Things are changing in the finance industry but the pace needs to accelerate. It will take banks some time to provide the speedy service that P2P platforms currently offer borrowers. Recognising the intensifying competition traditional lenders are ramping up their investment in new technology and developing P2P “hybrid” models.

Several banks are in the process of creating new lending solutions that amalgamate the P2P customer experience and traditional bank lending. The new solutions will use the same type of technology, processes, and understanding of underwriting as P2P platforms.

A number of experts predict banks will increasingly partner with P2P and fintech firms and some industry commentators are going as far as saying that many traditional lenders will simply buy these innovative platforms.

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