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What spectacular crowdfunding growth says about alternative finance

Crowdfunding has played a key role in the alternative finance revolution and news of its spectacular growth underlines just how much of a change in SME finance we are witnessing.

According to innovation agency Nesta, the UK crowdfunding sector in the UK is expanding at a rate of 410% per year, with the amount raised in 2014 at £84 million. Plus, more and more businesses are accessing larger sums this way, which means awareness and acceptance of this form of alternative finance are growing fast. In a recent Forbes article, the co-founder of Crowdcube is quoted as saying that the average amount of money raised through its crowdsourcing platform has risen from £115,000 in 2012 to £500,000 today.

Why is this growth so important? Because alternative finance is critical to SME sector growth and wider economic revitalisation: there is a lot of talk about record levels of confidence, but this for to mean anything, it has to be turned into something tangible. And crowdfunding, invoice finance and peer-to-peer lending are helping this happen. However, more impetus is needed; awareness of these services has to continue to grow.

Just look at recent comments from the Federation of Master Builders, in which they state that with better access to finance, the SME house-building sector could deliver an extra 20,000 homes per year and put a significant dent in the country’s housing supply needs. With SMEs still wary of traditional lenders, this leaves alternative finance providers to fill the gap in funding.

So, we’re back to the importance of educating small businesses about the availability and benefits of alternative finance. We need to see a concerted effort in this area in the short term. What might help is the advent of one-stop-shop alternative finance companies – there are a range of alternative finance services available and having all the options and the management of any plans under a single roof would surely make this type of finance even more attractive.

To find out more about A&T Business Associates services, contact us on 01903 602211 or info@atbusinessassociates.co.uk.

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