The P2P funding solution for SMEs in Scotland

The 2008 financial crisis changed banking forever. Following the bailouts and chaos, banks now operate under much greater regulatory scrutiny and have to meet much higher liquidity requirements which has, in turn, diminished their willingness to lend.

Industry research indicates that SMEs accounted for 99 per cent of private sector businesses in the UK in 2016, employed over 15 million people and their combined turnover was almost £2 trillion while contributing around £200 billion to the economy. It’s scary to think about the lifeblood of our economy being restrained by a lack of access to finance.

Peer-to-peer (P2P) lending is fast-increasing in popularity as an effective funding solution for SMEs and LendingCrowd, Scotland’s only headquartered alternative finance lender to SMEs, is at the forefront of the burgeoning P2P scene. We have facilitated loans of over £9 million since our 2014 launch, with deals ranging in size from £20,000 to over £1 million and in 2015 LendingCrowd helped Diet Chef complete one of the largest ever P2P deals seen in the UK in a £1.5 million debt finance transaction.

In 2016 we became the UK’s second P2P platform (and the first P2P lender to SMEs) to move from interim to full authorisation from the Financial Conduct Authority (FCA). In October, LendingCrowd partnered with the Scottish Investment Bank (SIB), the investment arm of Scottish Enterprise, in an initiative that will see £2.75 million invested in Scottish SMEs across the LendingCrowd platform. It is expected that the move will stimulate loans of up to £35 million for SMEs while leveraging significant private sector investment.

While we are not the biggest P2P platform in the UK, the investment made in our people and technology combined with the FCA approval has given us a market-leading position and we intend to build on this position of strength in 2017, continue to innovate for the benefit of our clients and launch an ISA in early 2017, one of the first to be launched in the UK Alternative Finance sector.

What does this mean for our own SME market in Scotland? While the big high street banks still dominate when it comes to the financing of SMEs, the senior executive teams from our growing client base are telling us they need other avenues of funding in order to grow at the pace required to keep competitive and this is not always possible when relying on traditional lending routes.

This provides us with a big opportunity, with a nimble and flexible approach allowing us to assess deals on a case-by-case basis and in much quicker time – something that is very appealing to fast-growing companies where speed of process is paramount. We’ve strengthened our credit assessment team led by former Head of Corporate and Commercial Risk at RBS, Ian Cunningham, over the last twelve months and we will continue to make best-of-class customer service a priority in 2017.

We have a number of announcements in the pipeline that are set to catapult the company into a new phase of growth this year – and we think that’s exciting for LendingCrowd and for the SME market in Scotland. It’s important because SMEs drive economic growth and better financing options allow companies to grow with all the knock-on benefits that has for our economy.

At LendingCrowd, we recognise the proud history Scotland has in fintech – as a nation we invented the first ATM and pin code, with these and other pioneering developments being reported in the pages of The Scotsman – and as the 21st century progresses we’re excited to be part of the fintech wave which is, in reality, still in its infancy and has so much more scope and potential. It’s important that we build critical mass, foster excellence and innovation and make sure we leave no stone unturned in our quest to build a modern industry that will benefit us all.

By Stuart Lunn, CEO, LendingCrowd

To hear more from Stuart Lunn book your place to Inspiring Growth: Alternative ways to take your business to the next level on March 22nd.