Stuart Lunn: The developing market for SME finance

Two days before the UK's EU referendum on 23 June, a significant announcement was made by one of the world's leading peer-to-peer lenders.

LendingCrowd chief executive Stuart Lunn. Picture: Contributed
LendingCrowd chief executive Stuart Lunn. Picture: Contributed

Funding Circle, an alternative lending platform for SMEs and very much like our own business at LendingCrowd, confirmed it had secured £100 million in investment for UK SMEs from the European Investment Bank (EIB). In the accompanying press release, a EIB spokesman said that he hoped the deal provides “an innovative model of supporting SMEs that could be used elsewhere in Europe.”

We now face added complexity and uncertainty that is likely to touch all quarters of the business world, but irrespective of a fast-changing socio-economic landscape most commentators agree that the traditional banking model is unlikely to retain its all-conquering position in the modern economy.

An august institution like the EIB making its commitment to alternative financing platforms is a further sign that a new global marketplace is developing when it comes to access to finance by small to medium-sized businesses.

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What does this mean for our own SME market in Scotland? While the big high street banks still dominate when it comes to the financing of SMEs, the senior executive teams from our growing client base are telling us they need other avenues of funding in order to grow at the pace required to keep competitive, and this is not always possible when relying on traditional lending routes.

Since launching in 2014, we’ve facilitated loans totalling £6 million to scores of borrowers and have over 2,000 investors signed up to our platform. Deals range in size from £20,000 right up to over £1m – last year we teamed up with Diet Chef to complete one of the biggest ever peer-to-business deals seen in the UK in a £1.5m debt finance transaction.

It’s still a relatively new marketplace for us, for our borrowers and investors but it’s a market that is maturing with every day. We have a number of announcements in the pipeline that are set to catapult the company into a new phase of growth – that’s exciting for LendingCrowd and we believe it’s exciting too for the SME market in Scotland. It’s important because SMEs drive economic growth and better financing options allow companies to grow with all the knock-on benefits that has for our economy.

And something of a postscript to finish on. Scotland has a proud history in fintech – we invented the first ATM and pin code – and in the 21st century it’s as important as ever that we continue to support our brightest young companies and founders in the sector in order that we build a critical mass for our exciting new industries.

That’s particularly the case as we navigate the uncertainty of post-Brexit times and take advantage of the opportunities that change will undoubtedly bring.

• Stuart Lunn is the chief executive and co-founder of alternative SME finance provider LendingCrowd