By Daniel Hunter

One in four (26%) people in the UK (or up to 12 million) would consider loaning money to UK small to medium-sized enterprises (SMEs) by joining a peer-to-peer lending scheme (P2P) in 2014 when the sector will be fully regulated by the Financial Conduct Authority (FCA).

This is according to a new study by rebuildingsociety, a peer-to-business lending website that connects SME borrowers with lenders looking for better returns than those offered by savings accounts.

The research also shows that 17% (or up to eight million people) would currently consider P2P lending over the next 12 months, without the need for additional regulatory protection. However, the added security should reinforce the sector given money lent through P2P is currently not covered by the Financial Services Compensation Scheme (FSCS) and lenders could lose cash if borrowers default.

Peer-to-peer lending - also known as person-to-person lending, peer-to-peer investing and social lending - is the practice of lending money to businesses or individuals online. The sector is set to boom with as much as £12bn to be lent through SME P2P schemes annually, roughly a tenth of total mainstream SME bank lending in 2012.

The new study also underlines the attraction of P2P schemes to small firms as around 24% (or 1.2 million) believe they will struggle to access finance in the next 12 months. Given this, 16% 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%) consumers not understanding what the term meant. Furthermore, more than half (54%) highlighted 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%).

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

Individual lenders can typically earn between 8% and 15% interest through P2P platforms such as rebuildingsociety, which is significantly higher than the sub-inflation returns offered by many bank and building society accounts. Basic rate taxpayers (20%) currently need to earn 3% on savings and higher rate taxpayers 3.99% to keep track with inflation.

“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," Daniel Rajkumar, Managing Director at said.

"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.”

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