Deloitte's alternative lender deal tracker found that alternative lenders are now firmly established alongside mainstream banks. Non-bank lenders made 195 deals in the UK and mainland Europe in 2014, up 43% on 2013, Deloitte said.
There has been growth in merger and acquisition activity, due to increased confidence in the markets and wider funding options, Deloitte said. M&A-related deals now account for just over half of all transactions since 2012, overtaking refinancing.
"2015 is a great time to be a borrower, as the sheer size and diversity of the liquidity targeting the mid-market has resulted in downward pressure on pricing and the emergence of innovative new structures," Deloitte said.
The deal tracker showered 121 deals conducted in mainland Europe in 2014, with increasing activity in France, Germany and Southern Europe, while 74 deals were signed in the UK.
Mainland Europe may be slower to embrace direct lenders than the UK, due to a higher percentage of family- and founder-owned businesses who are "intrinsically more risk averse than private equity", Deloitte said.
In the UK, "there remain ample opportunities for growth", the financial advisory group said. "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."