Non-bank lending jumped last year, with 195 deals in the UK and Europe, up 43 per cent from a year earlier.
Mergers and acquisitions activity drove around 51 per cent of the deals, overtaking refinancing, when considering deals since the tracker began at end of 2012.
"With increased confidence in the markets and wider funding options, we are seeing a pick-up in mergers and acquisitions activity," Fenton Burgin, head of UK debt advisory at Deloitte, said.
Alternative finance offers businesses a range of lending options which are outside of a traditional bank loans. The sector has swelled in recent years, as banks struggled to lend after the financial crisis, and alternative sources of finance sprung up to plug the gap.
The deal tracker also found that 62 per cent of deals were conducted in mainland Europe in 2014, compared to 38% of deals completed in the UK.
“There is increasing activity in France, Germany and Southern Europe. However, mainland Europe may not embrace direct lenders with the same lightning speed as the UK due to the larger share of family or founder owned businesses, who are intrinsically more risk averse than private equity.” Floris Hovingh, head of alternative lender coverage at Deloitte, said.
“There remain ample opportunities for growth in the UK. Smaller mid-market private equity houses still using high street banks are likely to consider direct lending as the market moves down in deal size.”
The UK dominates the alternative finance industry, recently increasing its market share to 77 per cent, according to an earlier report published by Cambridge University and Ernst & Young.
But while the UK has set the pace, the report predicts that the mainland European market will see increased growth and mature in the coming years after seeing average growth of 115 per cent for the past three years when the UK is excluded.