Awareness of alternative finance, which includes peer-to-peer (P2P) finance products, among SMEs, is at its lowest in the Midlands and the north of England, the British Business Bank (BBB) has revealed.
The BBB said that fewer than 40 per cent of firms in the Midlands were aware of P2P lending, compared with almost 60 per cent in London.
In its second annual British Business Bank report on Small Business Finance Markets, the BBB sets out its latest evidence on the ways in which the finance markets support smaller business and help them contribute to improving productivity and growth in the UK economy.
The report points out that while businesses are becoming more aware of the range of finance options available, still, over half of UK smaller businesses immediately go to their main bank when they first identify a financing need and do not shop around for finance. Survey evidence suggests nearly 100,000 SMEs and approximately £4bn worth of applications for debt are estimated to be rejected each year.
Despite this evidence, SMEs still favour traditional products, and P2P lending made up just two per cent of all bank lending in the first three-quarters of 2016.
The level of awareness of alternative finance among smaller businesses is up from 24 per cent in 2012 to 40 per cent in 2015 and awareness of crowdfunding up from 13 per cent to 49 per cent.
Annual lending through P2P platforms increased by 34 per cent to £3.9bn and AltFiData shows that P2P business lending made up £1.26bn of that amount.
Keith Morgan, chief executive of the BBB, said alternative finance is providing small businesses with greater choice and improved opportunities to find the right finance for their needs.
“While this continued improvement is welcome, our report shows that smaller businesses still face challenges on their growth journey.”