Warning over changes to alternative finance regulation

BUSINESSES risk losing a key source of funding from the UK’s £1.6bn alternative finance market because of changes to the way it is regulated, a North West corporate lawyer claims.

From April, the responsibility for monitoring peer-to-peer (P2P) lenders and crowd-funders, which currently rests with the Office for Fair Trading, will transfer to the Financial Conduct Authority, and lenders will be required to register in order to continue supporting businesses.

Chris Moss, corporate partner at JMW in Manchester, warned the changes have the potential to starve small companies of millions of pounds of funding unless P2P lenders and crowd-funders – many of whom currently operate with Consumer Credit Licenses – act now.

This is because it is likely to take the FCA several weeks to process requests for permission to continue providing finance, yet many lenders are unaware the changes are taking place.

Mr Moss said: “The UK’s alternative finance market is the most advanced in Europe and is now worth well over £1bn a year to the economy. That is funding that goes to businesses to create jobs and growth, but which risks being cut off because many lenders are either unaware of the looming changes or unsure what to do to continue operating from April onwards.

“Our information indicates that the FCA will take up to six weeks to process requests to trade as P2P lenders or crowd-funders, so the window to act is small. These organisations really need to take action now and seek advice.”

JMW is currently receiving more than 20 enquiries a month from alternative finance providers readying themselves for FCA regulation.

Lee Birkett, chief executive of Cheshire-based eMoneyUnion, a peer-to-peer lender which has recently raised £300,000 through the crowd funding platform crowdcube, said increased regulation may have some  positives.

“At eMoneyUnion.com, we are in the fortunate position of holding one of the few peer-to-peer interim trading permissions to be issued by the Financial Conduct Authority.

“The proposed changes are excellent news and bring credibility and professionalism to a non-regulated sector. It will dramatically increase businesses’ and consumers’ access to capital as many institutions alongside retail investors can deploy capital once regulated.”