IW Capital reveals how debt finance has evolved over the past decade
Ten years on from one of the most seismic events to affect the British economy – the 2008 financial crisis – the UK private sector is thriving. With industry figures indicating that business is truly booming for SMEs, last year, 23 million small and medium sized enterprises (SMEs) across Europe generated €3.9 trillion in value, employing a grand total of 90 million people. Chancellor Phillip Hammond acknowledged the impressive statistics, reiterating in the recent Spring Budget his firm opinion that SMEs form the backbone of the UK economy. Serving in no small part as a core driver for private sector progression, the nation’s alternative finance market grew 84% last year, facilitating £3.2 billion in investments, loans and donations, and is predicted to be worth £12.3 billion by 2020.
Considering there are 80 new companies founded every hour, the demand for SMEs to stay competitive is becoming more essential. Recent Liberis statistics found that 68% of SMEs are planning on taking out business finance in 2017 and 50% of SMEs will be raising finance with the intention of expanding their business in the year ahead. Within this diverse spectrum of investment options, debt based peer-to-peer (P2P) lending constitutes the largest proportion. Serving as a significant pillar of scale-up progression, £1.6 billion worth of debt-based transactions were facilitated into small and medium businesses in 2016, with debt platforms witnessing the fastest rate of growth – rising by 288% between 2013 and 2014 and experiencing 99% growth between 2014 and 2015. The rapid growth of P2P business finance represents a historic shift in the nation’s growth capital infrastructure and one that is only seven years in the making. With recent figures from the European Commission stating that 85 per cent of UK businesses use debt to finance their businesses, its transition from that of a decade ago has seen phenomenal progression.
IW Capital has developed a summary of how the role of debt-finance has evolved over the last ten years, leading to its current position as a vital growth-engine for private sector performance and scale-up support. Read Debt Finance: Ten Years on From the Financial Crisis HERE