Demand for alternative finance including peer-to-peer will increase going forward, two thirds (64%) of small business owners have predicted.
The report by Amicus Finance found that two in five (42%) small businesses have considered using alternative finance in the last five years.
In 2014 the total amount raised through alternative forms of lending was an estimated £1.74bn, double the figure recorded in 2013.
John Jenkins, chief executive of Amicus, said: “Business finance landscape has changed for good and demand for alternative finance is set to go from strength to strength over the coming years.
“Small businesses are increasingly turning to specialist lenders who have the skills to understand their specific needs.”
Small firms predicted alternative finance demand to increase by a quarter (26%) in the next two years.
The most popular form of alternative finance was crowdsourcing finance (24%) including peer-to-peer lending, followed by cashflow/invoice finance (18%) and property finance (8%) such as bridging loans and commercial mortgages.
On a regional basis, over three-quarters (77%) of small business owners in London predicted a rise in demand for alternative finance, the largest portion in the UK. Business owners in Scotland and Wales were equal second with 69%.
SMEs in the West Midlands were the least enthusiastic about alternative finance as just over half (53%) anticipated an increase.