Peer-to-peer has now officially taken off. What's the next wave of innovation in business finance?

The reluctance of banks to lend to businesses has kick-started massive innovation in business finance. Last week Zopa managed to pass the £1B lending mark – after operating for more than 10 years in the UK. Now the peer-to-peer (P2P) lender is expecting to do the next billion by the end of 2016. Clearly this is testament to a successful sector that is revolutionising the way British consumers and businesses are funded.

Yet, focusing on P2P misses a huge part of the story of how funding in Britain is changing. "Peer-to-peer" puts the spotlight on innovation on how these lenders source their own funding (from "peers"). That was helpful during the banking crisis when funding was scarce. Today we are facing fundamentally different challenges. There is plenty of funding available but many businesses are still finding it difficult to access credit.

This is because P2P lenders have often failed to innovate in terms of their assessment of creditworthiness, instead replicating underwriting models of the past. Some have built up large underwriting departments and look for similar risk profiles as banks. This unlocks relatively little additional credit for businesses that are not able to access bank funding or are looking for more flexible terms.


The focus on peer-to-peer has distracted from a potentially much more powerful source of innovation on the lending side. Funders have been finding better ways to assess business risk, for example by gaining access to more timely and accurate transaction data, seizing 'big data' insights, or leveraging the rise of cloud accounting to see 'live' business performance. They have also found ways to reduce the operational costs of underwriting and to insure risk or secure funding against future income streams. These innovations have made it possible for a much broader range of businesses to be funded on terms that are attractive.

We estimate that there are at least 100 new innovative finance providers in the UK who have launched in the past six years. For example, URICA harnesses the Euler-Hermes database to understand the credit risk of 40 million companies anywhere in the world. This means URICA is able to make near instant decisions on whether to provide SME invoice finance on individual or multiple invoices, opening up a completely new way of underwriting trade.

Some P2P lenders have also led innovation in developing new products. For example, Market Invoice has brought single invoice finance to small companies. Market Invoice is unlocking short-term working capital for those companies that trade with large corporates and often have payment terms of up to 100 days. The success in product innovation has driven Market Invoice’s impressive growth – providing £1M in funding every single day in July.


However, widespread innovation in underwriting models is baffling borrowers. New lending models are specialised and it is therefore hard for any one business to find the right funder and the best terms for their specific situation. Businesses are not yet aware of all the new funding options available to them.

The next wave of innovation in business finance has to connect those who are looking for funding with those who are offering funding – matching the right borrower with the right funder while also building ‘trust’ between both parties.

Finance platforms will fill this gap by mediating between businesses and finance providers. FUNDING XCHANGE is simplifying business finance and delivering the best available quotes from the whole of the market in a transparent and unbiased way. Unlocking funding for businesses that are starved of funding or are looking for more flexibility than their bank can provide.

We believe, this is the way to get credit flowing to businesses again.


FUNDING XCHANGE is helping a broad range of businesses find the right financing solution. Businesses complete just one application to receive offers within days from a broad range of funders. Business owners gain a transparent overview of available funding options and terms - giving them the ability to choose the option that's right for them. FUNDING XCHANGE has helped retailers, accounting firms, restaurants, hotels, farmers, trades people, manufacturers, and exporters access a broad range of funding solutions. FUNDING XCHANGE helps source funding at all stages of building and growing a business; focusing on working capital with typical requests for funding seeking £20-200k for 6-12 months.