An analysis of Bank of England data pertaining to its “Funding for Lending” scheme (FLS) suggests that loan prospects for the UK’s SMEs are improving substantially – but the alternative finance sector is playing a key part in this upswing.

The leading alternative finance news site, AltFi, has been tracking FLS lending since Q1 2014, comparing it to the contributions made by alternative lenders. During 2014, FLS lending to SMEs declined substantially, with alternative lenders eventually managing to close the funding gap caused by a quarterly contraction of £128m in FLS credit in Q3 2014. Taking the year as a whole into consideration, the supply of FLS credit to SMEs contracted by £1.999bn in 2014.

FLS credit has, however, seen a resurgence in 2015, with a climb of £490m in Q2 (and a little less in Q1). But AltFi’s own data shows that alternative business lenders produced an impressive £367m of lending in Q2 2015, with the peer-to-peer lender sector advancing no less that £1.305bn to UK SMEs since the beginning of 2014. 

This brings the grand total of alternative lending to £1.672bn – more than enough to plug the £909m gap caused by the overall fall in FLS lending over the last year-and-a-half. The alternative lending sector’s balance (in terms of changes in FLS funding and the corresponding contributions of alternative lenders since the start of 2014) now stands at £763m.

FLS lenders are this year significantly improving their dismal 2014 record, while alternative lenders are also continuing to grow – a combination which represents an optimistic lending climate for small UK businesses.

Source:

http://www.altfi.com/article/1406_q2_2015_funding_for_lending_update