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How local P2P lending is fuelling business growth in rural Britain

PUBLISHED: 10:51 27 April 2017 | UPDATED: 15:24 28 April 2017

Jane Dumeresque, Folk2Folk CEO

Jane Dumeresque, Folk2Folk CEO


‘Under the bank referral scheme for business lending, the UK’s major banks are now required to refer the businesses they turn down for a loan to an alternative provider of which P2P platforms like Folk2Folk will be one option’

It is fair to say that over the past decade the big banks have reduced their risk appetite making it less attractive to fund small businesses across the UK and consequently Britain’s small businesses are finding it increasingly challenging to secure finance through traditional methods. Starved of such funds this impacts UK businesses’ ability to grow, hire new staff, diversify and increase their contribution to the UK economy.

At the end of 2016 the Federation of Small Businesses (FSB) examined the effect bank branch closures is having on SMEs, with their report highlighting the disproportionate impact branch closures are having in some parts of the UK and particularly in rural areas. The FSB’s research indicates that many businesses in rural areas (although not exclusively) are vulnerable to reduced banking services and branch closures – particularly when the branch is the “last in town”. As more banks withdraw from rural areas, local businesses are becoming increasingly isolated and left with less options to help fund and grow their businesses.

The banks’ reluctance to lend to businesses that do not meet tick-box criteria has created a vacuum in which small business owners are now searching for alternatives sources of capital outside of the mainstream banks. It is here that alternative finance and peer-to-peer lenders are playing an increasingly central role and will become a first port of call in the future, rather than an afterthought.

The bank referral scheme for business lending has come into force and can be a real positive for small business across the UK. Under the scheme the UK’s major banks are now required to refer the businesses they turn down for a loan to an alternative provider of which P2P platforms like Folk2Folk will be one option. This initiative is set to contribute significantly to making information on alternative funding more accessible to local businesses that have been turned down by their high-street branch.

It is universally agreed that UK’s rural businesses are vital to the success of our economy. Put simply, small businesses, especially rural businesses must succeed if the UK economy is to succeed. And yet, as we have seen, they are not yet being given the best chance to do so.

A recent report from the University of Cambridge showed an encouraging change as more than 12% of new lending to SMEs came from the peer-to-peer sector – According to the industry trade body the P2PFA, a total of over 36,000 UK businesses have used P2P to get a loan to help them grow.

Lending at the local level will encourage business growth in rural areas by connecting local business owners with local investors. What we are now seeing is a return to a formally bygone tradition of community focused lending, a movement of which alternative providers like Folk2Folk are a specialist in.

Unlike the high-street banks, alternative local lenders like Folk2Folk can take a more holistic approach through their local knowledge and understanding of the reputation of the businesses in their local area. This means that businesses can access the right type of finance that suits their requirements.

Growth in rural areas is dependent on solutions that work for businesses at a local level as we must not leave businesses behind by failing to provide them with access to finance. Ultimately, we want to see businesses coming to alternative lenders as a first port of call to help them crack on and grow must faster than going to traditional financial providers.

To learn more about finance options from Folk2Folk, please visit the website or call 0330 053 5532.

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