There is a growing recognition in lending that one size simply does not fit all. The outlook for alternative lenders is strong for 2015, based on significant capital raised this year. Other factors such as changing investor appetite in a low-yield environment and the improving economic activity in the UK and US economies will only boost this activity.
Traditional lenders still face the challenge of capital shortfalls and increased regulatory demands on the allocation of what bank capital there is.
Editor’s Note: Nicole Miskelly's article highlights a concerning trend for the banking industry, alternate lending is becoming far more commonplace as people get fed up with the banking bureaucracy. While the trend towards alternative lending started in the States around the late 1990s and was relatively slow, the financial environment and circumstances in Europe are expected to accelerate the changing lending tide over there.
The rise of alternative lending in the U.S. took more than 14 years to reach its currently powerful level, but it seems that the changeover will be comparatively quicker in Europe because of the ultra-low interest rates combined with high levels of newly raised institutional capital keen for mid-market investment opportunities.
The meteoric rise of alternative lending solutions is a very good thing for businesses, but large and small. As more avenues for creating capital open up, banks are practically forced to offer more reasonable loan agreements in order to match the healthy competition. Competition is always a good thing. More access to needed funds with appropriate risk management measures in place can only be of benefit to all, as the recovery from Europe's recession continues. Here are our article highlights:
- Paypal recently ventured into the alternative lending market, has provided 35,000 loans since September of 2014.
- Research from the University of Cambridge and Nesta shows that the UK’s alternative lending market, including invoice trading and Peer to Peer lending is expected to double in 2015.
- Alternative lenders have a great opportunity to team up in order to lend to bigger companies on a direct basis without banks being involved.