UK consumer regulatory body the Financial Conduct Authority (FCA) has promised a full review of crowdfunding and P2P lending in 2016, after revealing UK business loans in 2014 (£749m: 988.48) surpassed consumer loans (£547m) for the first time.
Loan-based crowdfunding platforms allow investors to lend money to individuals or businesses in the hope of a financial return in the form of interest payments and a repayment of capital over time.
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In a review of its 2014 regulation, the FCA said Nesta and the University of Cambridge reported around £11-16m of loans from consumer-lending platforms are also used to finance businesses.
The average amount borrowed for business purposes in 2014 was £73,222. A third (33%) of borrowers surveyed by Nesta and the University of Cambridge answered that it was unlikely or very unlikely that they would have been able to secure funding with other sources.
On the other hand, 44% reported that it was likely or highly likely that they would have been able to find funding elsewhere if they had not used loan-based crowdfunding platforms.
Default rates for business loans varied from platform to platform, from 1% to significantly higher. The report says that some have now closed to new business.
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By GlobalDataInvestors in business loans are primarily male and aged 55 or over. They also tend to be wealthy, with one-third having an annual income in excess of £50,000. Investors have an average portfolio of over £8,000, spread over a median of 52 business loans.
The FCA paper said: "In the months since we introduced our rules, we have seen the crowdfunding market continue to grow rapidly. We recognise that it is still early but, at present, we see no need to change our regulatory approach to crowdfunding, either to strengthen consumer protections or to relax the requirements that apply to firms. We plan to carry out a full post-implementation review of the crowdfunding market and regulatory framework in 2016 to identify whether changes are required at that stage."
