18th December 2015
Does recent alternative finance controversy call for increased regulation?
As you may know from a series of our previous blogs, alternative sources of funding are on the rise with increasing numbers of entrants to the market. In terms of volume, the sector is still considered minute, but is most definitely succeeding in challenging traditional perceptions, particularly in funding UK SME’s, where alternative finance is increasingly becoming ‘Plan A’. This is likely due to the speed of acceptance paired with availability of cash flow, and of course, the soon to be implemented Bank Referral Scheme which will hugely increase the number of SME’s becoming aware of the advantages of the alternative routes to finance available.
With such a buzz around these innovative alternative funding options, there has been a disproportionate amount of media coverage in comparison, however this also now seems to be on the rise, with the vast majority of coverage being positive. However, with more and more start-ups and small businesses turning to alternative finance, it was unlikely to get away unscathed when it comes to negative portrayals in the media, and in October, this is exactly what happened.
Stockholm based lending platform TrustBuddy AB filed for bankruptcy, with admission that their troubles were due to serious misconduct within the company; something likely to cast a shadow within the industry. Bankruptcy was filed following the discovery of an astonishing SEK44 million (€4.7 million) discrepancy – a destination arrived at by the firm due to using lenders’ capital to finance a number of bad debts, despite their instructions and lack of permission to do so. Amidst the controversy, Swedish FSA is expected to review the activities of other Swedish lenders, leading to more stringent monitoring of the sector and potentially a knock on effect to neighbouring markets.
So, what are your thoughts on the issues faced by TrustBuddy? Could this highlight the need for increased regulation within the industry? We would love to hear your thoughts, why not tweet us @DavAssetFinance and join in the conversation.
With such a buzz around these innovative alternative funding options, there has been a disproportionate amount of media coverage in comparison, however this also now seems to be on the rise, with the vast majority of coverage being positive. However, with more and more start-ups and small businesses turning to alternative finance, it was unlikely to get away unscathed when it comes to negative portrayals in the media, and in October, this is exactly what happened.
Stockholm based lending platform TrustBuddy AB filed for bankruptcy, with admission that their troubles were due to serious misconduct within the company; something likely to cast a shadow within the industry. Bankruptcy was filed following the discovery of an astonishing SEK44 million (€4.7 million) discrepancy – a destination arrived at by the firm due to using lenders’ capital to finance a number of bad debts, despite their instructions and lack of permission to do so. Amidst the controversy, Swedish FSA is expected to review the activities of other Swedish lenders, leading to more stringent monitoring of the sector and potentially a knock on effect to neighbouring markets.
So, what are your thoughts on the issues faced by TrustBuddy? Could this highlight the need for increased regulation within the industry? We would love to hear your thoughts, why not tweet us @DavAssetFinance and join in the conversation.