One measure of how quickly the financing landscape for smaller businesses has changed can be seen in the quarterly lending figures published by the UK's Peer-to-Peer Finance Association, the industry body for online P2P lenders. These show that in just six years the UK's biggest business lending website, Funding Circle, has grown to become the third-largest net lender to small businesses in the UK, behind RBS/NatWest and Lloyds Banking Group.
This is an extraordinary feat. In the first half of this year, Funding Circle's net lending to companies – consisting almost entirely of unsecured loans averaging £60,000 – reached almost £320m. That's more than double the total for the first six months of 2016, although the pace of growth is flattered because lending slowed markedly in the three months leading up to the Brexit vote on June 23rd last year, resulting in a very subdued second-quarter figure.
Even so, the fact remains that the owners of small businesses now have access to a completely new source of unsecured debt funding with capacity equivalent to a leading high-street bank. No wonder Samir Desai, the co-founder and chief executive of Funding Circle, was in such bullish mood when I chaired a panel discussion with him at the Lendit Europe conference in London in early October, alongside representatives of RBS and Lloyds.
The session was also fascinating because it included the head of RBS's experimental online business lending platform, Esme Loans, which offers unsecured products very similar to those on offer from Funding Circle. Richard Kerton, the head of Esme, explained that RBS had set up the operation to learn more about the digital lending market that Funding Circle has in effect created from scratch. Even in small business banking, it seems, imitation is the sincerest form of flattery.
You can watch a video of the discussion here.