Alternative lenders including peer-to-peer lending platforms have regained ground initially lost during the pandemic, the British Business Bank (BBB) claims.
Analysis of lending activity by the BBB found that while mainstream lenders dominated emergency Covid loan support last year, alternative lenders such as P2P platforms are now recovering.
“2021 has seen something of a return to the pre-pandemic trend as government schemes became less dominant and market-based lending began to increase again,” the BBB said in its latest Small Business Finance Markets report.
It found that the gross flows of lending to businesses via marketplace lending, which is its term for P2P lenders, was up from £4bn in 2020 to £4.1bn in 2021.
In contrast, bank lending fell 45 per cent annually during 2021, according to the report.
“The increase in lending during the year comes despite the closure of bounce back and coronavirus business interruption loans, which were key to supporting volumes in 2020,” the BBB said.
“This suggests activity during the year has shifted back towards more market-based lending.”
The BBB repeated claims made last year that the P2P lending market is evolving.
The state-backed lender said in its 2020 report that the pandemic has shifted the trend towards institutional funding and cited Metro Bank’s acquisition of RateSetter as an example of how the sector is changing.
The latest report also highlighted a surge in equity investment into smaller UK businesses last year.
The BBB said £14bn of equity investment was made during the first three quarters of 2021, a 130 per cent increase on the £6.1bn invested over the first three quarters of 2020.