Good news for businesses looking for online funding as public shows interest in peer-to-peer lending

One in four people in the UK would consider loaning money to small businesses through peer-to-peer (P2P) lending once the sector is fully regulated.

In 2014, the sector will be fully regulated by the Financial Conduct Authority (FCA).

P2P lending is the practice of lending money to businesses or individuals online.

The survey by rebuildingsociety also shows that 17 per cent would currently consider P2P lending over the next 12 months without the need for additional regulatory protection.

The added security from the FCA should reinforce the sector, given the fact that money lent through P2P is currently not covered by the Financial Services Compensation Scheme (FSCS) and lenders could lose cash if borrowers default.

The new study also underlines the attraction of P2P schemes to small firms as around 24 per cent (or 1.2 million) believe they will struggle to access finance in the next 12 months.

Given this concern, 16 per cent of small businesses would consider applying for a P2P loan over the next year.

The study suggests the biggest obstacle to the growth of P2P lending is low awareness with six in ten (59 per cent) consumers not understanding what the term means. 

Furthermore, more than half (54 per cent) highlight a lack of knowledge as the principal reason as to why they wouldn’t invest in a P2P scheme, followed by the fear of borrowers not repaying the loan (46 per cent).

Men are three times as likely (27 per cent) to participate in P2P schemes in the next 12 months than women (9 per cent), while Londoners appear to be more open to lending than those in the regions, with 36 per cent of Londoners considering lending to businesses compared to 21 per cent in the North West and just 11 per cent in Wales.

Individual lenders can typically earn around 8 per cent interest through P2P platforms.

Daniel Rajkumar, managing director at says, ‘This research shows P2P lending is well on its way to entering the financial mainstream with strong levels of interest from consumers and SMEs alike.

‘The FCA’s regulatory oversight from next year will provide consumers with an additional layer of protection and our study shows this is very likely to boost take-up.’

Further reading on crowdfunding

Ben Lobel

Ben Lobel

Ben Lobel was the editor of from 2010 to 2018. He specialises in writing for start-up and scale-up companies in the areas of finance, marketing and HR.