THE VAST majority of business borrowers in Western Europe expect to use the same amount or more funding from alternative finance providers over the next five years, a new report has found.
This sentiment is echoed by investors, with the majority predicting that the amount they fund businesses via alternative finance providers will increase or stay the same.
Research commissioned by magic circle law firm Allen & Overy surveyed businesses and investors across Western Europe to find out their views on financing.
“The appetite among both corporates to access, and investors to provide, alternative sources of finance remains as strong as in previous years, with nearly 50 per cent of both borrowers and investors expecting to increase their use/provision of alternative finance over the next five years,” said the report.
47 per cent of businesses expect their use of alternative finance to increase over the next five years, while 39 per cent expect it to stay the same.
29 per cent of investors expect the amount by which they fund large enterprises to increase and 42 per cent expect it to stay the same. 64 per cent expect to increase the amount they allocate to medium enterprises, with 23 per cent expecting it to stay the same. And 44 per cent of investors expect to increase the amount they fund to small businesses, with 33 per cent predicting they will invest the same amount as they do now.
The report found that businesses use alternative finance sources for a third of their total funding – private equity was the most popular type of alternative finance provider, while 16 per cent of corporates said they currently use peer-to-peer and crowdfunding platforms.
Business borrowers across Western Europe had mixed feelings about the impact of Brexit. 31 per cent said it limits the opportunities for them to obtain alternative sources of funding from other countries, but 42 per cent of respondents said it had no impact on their plans to obtain finance from alternative providers.
Meanwhile, 43 per cent of investors said that Brexit presents investment opportunities, but 34 per cent said Brexit limits their ability to provide funding to businesses in the UK.
“More than two-thirds of UK borrowers say the Brexit vote has hindered their ability to tap into alternative sources of funding beyond their home borders,” said the report. “Nearly half say it has put their plans to secure funding from alternative providers on hold – a reflection of the broad unease with which Brexit was met by the vast majority of London’s finance providers.
“It’s unlikely that the full impact of Brexit will become clear for several years. Experts said the gloomy prognosis in the UK among borrowers and investors reflected a wider sense of unease, among British corporates and London-based financial services providers, as to the UK’s long term place in the world.”