Report: How new-model finance is changing the game for small businesses

The Centre for the Study of Financial Innovation (CSFI) has published a new report examining the growth of Peer to Peer and how it is been used by small businesses and investors.

In the report, Andy Davis looks at the explosive growth of new sources of finance for small businesses over the past five years represents a revolution in choice for borrowers and in investment opportunities for individual savers. But the challengers remain just that compared with the dominant market share of the big banks, and mass-market investment in these alternative assets is in its infancy.

Davis suggests that in response to these pressures, hybrid models will develop. Established direct lenders will increasingly use P2P platforms to syndicate their loan books into the retail market; P2P firms may, in addition, start to deploy their own balance sheets, like a bank (which will increase their profitability), or run collective investment schemes, like an asset manager. In other words, the boundaries between established and alternative providers of funds for SMEs will become more blurred, and the sources of those funds will expand to include a wider universe of investors.