Crowdsourcing will be regulated in April and lending platform RebuildingSociety welcomes the change
Peer-to-peer lender RebuildingSociety says there are 12 million people who would loan money to UK tech start-ups and believes that it can make this happen.
When the peer-to-peer (P2P) lending scheme becomes fully regulated by the Financial Conduct Authority in 2104, one in four people, around 12 million, would be happy to lend money to small and medium enterprises, according to RebuildingSociety’s research. Even now, before regulation, up to eight million (17% of the population) would be happy to lend money to a small business.
Hi Ho silver lining
Entrepreneurs in the IT channel could enjoy a funding boom as up to £12 billion of investment is sourced through SME P2P schemes annually, says the lender. Backing by the FCA would make sure investors were aware of the inherent risks involved with investing in start-ups, but the fact that companies like RebuildingSociety would be required to vet businesses adequately to avoid scams would boost confidence.
With 1.2 million SMEs believing they will struggle to access finance in the next 12 months, amateur “dragons” could offer as much as one tenth of the existing funding available from institutions, but without the red tape. The time-saving created when bypassing institutions has mass appeal among SMEs, with 760,000 of them expressing an interest in P2P loans.
Daniel Rajkumar, RebuildingSociety’s MD, said the research showed that P2P lending is on its way to entering the financial mainstream. “There’s strong levels of interest from consumers and SMEs alike,” said Rajkumar.
The FCA’s regulatory oversight from next year will make things even better, he argued, by giving consumers an additional layer of protection. “Our study shows this is very likely to boost take-up,” he said.
However, the biggest obstacle to the growth of P2P lending is low awareness, with six in ten (59%) of consumers unaware of the term P2P. More than half (54%) said their lack of knowledge was the main reason why they wouldn’t invest in a P2P scheme, with fear of borrowers not repaying the loan a close second at 46 percent.
Who wants to lend to small businesses?
Bottle of the sexes: Men(27%) v Women (9%)
North/south divide: Londoners (36%) v Northerners (21%)