There is a "wall of money" waiting to be deployed in the alternative finance sector, says peer-to-peer lender InvoiceX, but there are currently too few opportunities to invest the capital.
InvoiceX director Dermot Crean told InvestorDaily that the company, which lends directly to businesses with large customer bases, has an "enormous" amount of capital waiting to be invested.
He said peer-to-peer lenders like InvoiceX offer investors a compelling opportunity, providing an average return of around 10 per cent.
“[As an investor] you want diversification, you don’t want any real risk, you just want a reasonable return on your cash,” he said.
Mr Crean also said that alternative assets, like peer-to-peer lenders, aren't as susceptible to certain market trends like falling oil prices, removing a significant investment risk.
However, while the asset class isn't short of investors or capital, it does face a significant hurdle. According to Mr Crean, there is a deficit between the amount of money seeking to be invested and the number of businesses looking to peer-to-peer lenders as a source of finance.
“We could really be deploying quite a serious amount of money,” Mr Crean said.
He said that it all comes down to the lack of awareness – an issue that needs to be tackled by policymakers.
Policymakers, said Mr Crean, should look to introduce a “referral mechanism," similar to what the UK government recently implemented. He said when a bank rejects a business loan; it must be required to refer the business owner to an alternative finance provider.
“If [policymakers] just took that one step it would create awareness.”
Accelerating the use of peer-to-peer lenders works in the favour of policymakers. Mr Crean pointed out that alternative finance is part of the “sharing economy”, which is growing in importance. Simply, he said alternative finance helps to grow businesses, provides investors with favourable returns, and therefore improves the the broader economy.
“Policymakers could really help accelerate the development of this sharing economy model for the benefit of growing businesses and [investors].
"In the end [the sector] will just grow, but if the government helps it will actually grow quicker," he said.