Alternative finance intermediaries, including sources such as crowdfunding, peer-to-peer lending and invoice trading, raised almost £1 billion in 2013, market data has revealed.
According to a report published by the charity Nesta, the University of Cambridge and the University of California, Berkeley, the alternative finance market this year showed a 91% year on year funding growth since 2012.
The study shows that equity-based crowdfunding in the UK grew by 618% from in the last year, while peer-to-business lending grew by 211%.
Between 2011 and 2013, UK start-ups and SMEs received £463m worth of early-stage, growth and working capital from these sources.
Researchers calculated that in total, over the last three years the alternative finance market contributed £1.74 billion of personal, business and charitable financing to the UK economy.
They also predicted that such sources may raise as much as £1.6 billion in 2014, as the market becomes an increasingly attractive option for individuals and businesses seeking new ways to secure funding, rather than from mainstream banks.
“The data proves that our sector is increasingly moving from ‘alternative finance’ to mainstream ‘modern finance’”, said Julia Groves, chair of the UK Crowdfunding Association.
“Crowdfunding is already providing real value in the provision of desperately needed capital in the engine room of the UK economy.”
She added, “With growing awareness and the advent of a new regulatory framework early next year the future looks extremely bright and the sector is primed to go on and completely replace aspects of retail banking.”