Deloitte’s Alternative Lender Tracker recorded 73 deals for the quarter which is over double the 35 deals recorded for the same quarter in 2013. The accountancy firm estimates that European direct lending funds have EUR 50bn of committed capital, including spent and unspent capital for private debt and plans to raise another EUR 15bn during 2014.
Fenton Burgin, head of UK debt advisory at Deloitte said: “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.”
Non-bank lending has grown significantly in recent years and as traditional banks have taken a step back, start-ups have raced to fill the gap with new business models. Paypal recently ventured into the alternative lending market, alongside start-ups such as peer-to-peer (P2P) Lending Club which was valued at USD 8.9bn after its initial public offering at the beginning of December and small business loan provider OnDeck which gained a valuation of almost $9bn after its shares rose almost 60 per cent on their first day of trading.
Steve Allocca, Head of Credit at Paypal said: “It’s just scratching the surface as what we see as the opportunity there, this has never been a space that’s been particularity well served by banks or traditional lenders.”
Paypal launched their merchant lenders programme last September and has provide 35,000 loans and made USD 60,000. Paypal charges merchants a fixed fee rather than an interest rate for the money and calculates risk based on the data they have about merchants’ revenue.
Floris Hovingh, head of alternative lender coverage at Deloitte said: “With the leverage loan and high-yield bond market cooled down, alternative lenders have an opportunity to team up in a club to lend to bigger companies on a direct basis without a bank’s involvement.”
According to the Bank of England’s latest Trends in lending report, in the last quarter bank lending to SMEs was down by GBP 400m. Research from Nesta and the University of Cambridge shows that the UK’s alternative finance market, including P2P lending and invoice trading is expected to double in 2015 and results show that 44 per cent of SMEs surveyed are familiar with at least one type of alternative finance, as are 58 per cent of UK consumers.
This bodes very well indeed for Sweden listed TrustBuddy, which recently acquired the Dutch company Geldvoorelkaar. Geldvoorelkaar is the first P2P lending platform with a credit licence issued by the Dutch Financial authority (AFM) and offers a professional and established alternative source of financing for SMEs. TrustBuddy also acquired Italian Prestiamoci, which is a P2P lending company focussing on long term consumer loans. The acquisitions mean that TrustBuddy will not only grow organically but also structurally, making the years ahead very exciting for investors.