Led by invoice finance, peer-to-peer lending and crowdfunding, alternative finance lending passed the £1 billion mark in 2013 according to AltFinanceNews.com.

Coming shortly after a call from the Financial Conduct Authority for better regulation of the sector in order to further strengthen its small business funding foundation, the new data from the industry publication on SME lending are indicative of alternative finance’s move into the mainstream.

Continued caution from traditional high-street lenders, despite various funding initiatives from the government, was key in driving growth in the alternative finance sector and in giving it an increasingly prominent role in 2013. Growing interest in alternative SME lending schemes from banks, such as the link-up between Santander UK and the Funding Circle (which passed the £200 million mark in 2013), illustrated the sector’s shift from alternative towards mainstream SME finance services.

Hence, that 2014 has already brought news of dynamic growth in the alternative finance sector and of calls to give the sector a broader, more central role in providing SME finance comes as little surprise.

New data on the marked growth of small business invoice finance use from leading accountancy firm Wilkins Kennedy illustrates why alternative finance has become so popular and why it is set to establish itself as a mainstream SME lending product in 2014. According to the firm, invoice finance is helping to stop business owners putting homes and other personal assets at risk when generating capital for start-up funding or for maintaining cashflow.

2014 has only just begun but the trajectory of invoice finance and other alternative finance services looks set.

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