|07/26/2023||New CPO at Funding Circle US|
|03/08/2023||Lending Tree adds Funding Circle|
|01/05/2023||Funding Circle appoints new MD|
|10/17/2022||Funding Circle can now lend in Nevada|
|09/25/2022||Funding Circle partners with Bayview AM|
Episode 100 - Funding Circle Partners With Nationwide
Funding Circle, Usury, MCA Facebook Group
Potential Match Found in deBanked UCC Filer list
|Company Name||Phone number||UCC Alias 1||Alias 2||Alias 3||Alias 4||Alias 5|
|Funding Circle||855-385-5356||FC Marketplace, LLC|
Funding Circle’s US arm originated $259M worth of business loans in the first half of 2023, up from $214M in the previous half. Those loans are funded “through forward flow agreements with institutional investors.”
The company’s recently filed financial statements say that US loans are “showing good growth.” And it’s with top tier borrowers to boot. It referred to 32% of its first half loans as being “super prime.”
AEBITDA was negative but that’s due to its planned investment to scale the business, the company said.
Yields on their US Loans averaged 5.8%, up from 4.4% over the same period last year.
The company’s newer product “Flexipay” was highly touted in its first half financials. Flexipay works like a line of credit. Once approved for a line, you provide invoice details to Funding Circle and they’ll make a secure payment in your name.
“We’ve seen good growth in US Loans and FlexiPay is showing great momentum as we expand our offering to access a larger market and serve more of our customers’ needs,” said company CEO Lisa Jacobs.
The American arm of Funding Circle originated $393M in business loans in 2022, according to the company’s latest public financial statements, nearly quadruple the previous year.
The majority of Funding Circle’s loans are currently projecting annualized returns in the vicinity of US inflation levels. A graph of their loans by cohort is below:
Funding Circle US has a fairly diversified base of capital, having worked with eight forward flow funders in 2022, one of which was a credit union.
The UK still remains the overall company’s primary market. It originated £723M in business loans in 2022, not including those part of government support scheme programs.
Funding Circle’s US arm originated $168M worth of small business loans in the first two quarters of 2022.
“In the US, we continued to offer our commercial loan product during the six months to June 2022 and we have expanded this offering to serve super-prime businesses,” the company said in its latest financial disclosures.
Notably, Funding Circle closed funding deals with four banks and credit unions during the period and anticipates adding new investors as the year continues.
Globally, Funding Circle says it has helped 130,000 small businesses access $19.4B in funding since inception.
“Lending investor returns through the platform remain robust and attractive,” the company said on LinkedIn. “We’re making early progress against our medium-term plan to transform the business into a multi-product platform, as we continue to help more small businesses get the funding they need to win.”
“I think the main thing is that Funding Circle for a long time’s been working with banks and the way we work with Farm Bureau Bank is no different, which is we’re out here to try and put money into the pockets of small businesses,” said Angus Sanders, Chief Revenue Officer & VP Product at Funding Circle, “and Farm Bureau Bank is going to help us to do that.”
According to Sanders, Funding Circle and Farm Bureau Bank have joined forces in delivering quality loans to small business owners. This partnership allows Farm Bureau Bank to purchase loans through Funding Circle in support of the small business community. They even extend a hand to small businesses in rural communities who may not be close to a bank to receive the services they need to grow their business.
“For those customers who are in rural areas, and perhaps can’t travel so easily to a branch, working with Funding Circle and Farm Bureau Bank, they’re able to get a loan much more easily and quickly, typical turnaround, 24 hours to offer and 48 hours to loan, which is very different to your typical small business loan. So, I say those are the primary areas where this helps small businesses,” said Sanders.
With the increase of banks wanting to do more small business lending, sometimes they struggle with finding businesses or being able to process the loans, Sanders explained. Working with organizations like Funding Circle, Farm Bureau can now provide capital faster and fund more small businesses.
During the pre and post-pandemic era, Sanders said he believes that fintech has evolved and will only continue to do so. And with fintech on the rise, Sanders said that other products like Lending as a Service, will continue to be a key growth area in the coming months.
“Farm Bureau Bank is starting with financing and we hope someday they’ll refer deals to us, […] but what this really shows is the deepening focus on partnerships between fintechs and banks, and particularly this emergent Lending as a Service product, which within Funding Circle sort of takes the lead on but lots of other fintechs go into and I think you’ll see, you’ll see more about that in the coming months,” said Sanders.
Funding Circle’s US originations fell significantly in 2021 versus the previous two years, the company’s latest year-end report revealed. US originations were only £316M in 2021, of which £224M was PPP funding. That £92M in non-PPP funding was a massive drop from the £619 in 2019, for example.
Funding Circle attributed the reduction in demand to the ending of government stimulus programs.
“The US has a fragmented SME lending market,” the company stated in its full-year report. It estimated that 89% of all SME lending was done through banks and only 10% through specialty finance providers.
Funding Circle’s loans have small margins. The company projects annualized returns of only 5-7% on its US-originated non-PPP loans. Meanwhile, annualized inflation in the US by comparison is currently trending at 7.9%.
Funding Circle also announced its exit from the peer-to-peer lending model. According to the Financial Times, Funding Circle CEO Lisa Jacobs said of it: “There’s been a big shift; the industry has shrunk severely.”
Denver-based small business lender Funding Circle announced a partnership with Nationwide Insurance, in a move designed to improve access to capital for businesses that use Nationwide as their insurance providers. The move is a continued trend in the small business financing industry to create access to resources surrounding business financing in places that merchants are interacting with on a daily basis.
“Funding Circle is thrilled to partner with Nationwide to offer essential resources that seamlessly supplement our customers’ business needs and set them up for success in a competitive market,” said Vipul Chhabra, Managing Director of Funding Circle US.
“This first-of-its-kind partnership with one of the country’s leading insurance and financial services providers embodies our core values,” said Chhabra. “[Our values are] to truly support American small business owners in accomplishing their goals, especially among underserved populations that banks typically are not incentivized to reach.”
On top of access to funding, the partnership offers access to resources surrounding small business financing to Nationwide customers. According to a press release by the companies, this is the first merger of a top insurance company with an online lending platform.
“Today’s hardworking business owners have a variety of insurance and financial needs. They are looking for innovative ways to have those needs met so they can focus on running their companies,” said Kasey Ketcham, Associate Vice President of Commercial Digital Enablement at Nationwide.
“This partnership with Funding Circle is another example of Nationwide’s commitment to addressing the challenges small business owners are facing,” said Ketcham. “[Nationwide is] offering expert guidance and comprehensive insurance and lending resources hand-in-hand to help them make informed decisions to fortify their business and livelihoods.”
According to Nationwide, the partnership will be a mutual referral program, where Funding Circle customers will be exposed to Nationwide products, and Nationwide customers will be exposed to Funding Circle products. Nationwide representatives explained the partnership exclusivley to deBanked.
“Exactly what is provided through Nationwide.com or the app is a link to Funding Circle,” said a Nationwide representative. “Once there, the user can complete an application for loan coverage, but are not granted special exception because they came from Nationwide.”
“They would still go through the loan application and underwriting for funds and vice versa,” said the representative. “The Funding Circle website/app is providing a link to Nationwide that the user can ‘learn more’ through the Coverage Assistant page, or “get a quote” using Nationwide Business Express.”
Funding Circle is joining one of the trendiest markets in the industry right now, Buy-Now-Pay-Later (BNPL). The company will provide its customers with a way to spread supplier payments or invoice costs over 90 days by providing the capital upfront and allowing the borrower to pay later.
It has been dubbed FlexiPay by the UK-based lender and will enable access to between £3,000 – £50,000 of upfront capital. Loan eligibility will be determined in minutes and the funds will be available almost instantaneously, according to Funding Circle. This combination of small business lending with BNPL services is seemingly unprecedented to the industry.
“We are really excited to be using our market-leading technology to launch FlexiPay, which is designed to support small businesses to manage and control their cash flow,” said Lisa Jacobs, the Europe Managing Director of Funding Circle. “The new product enables businesses to buy now and pay later on any business spend in a way that suits them.”
The payment option will give access to “interest-free” financing to borrowers with a flat fee of 3% per invoice, without any annual charges or setup fees. Access to FlexiPay will not be given to new customers until the end of the year.
According to a source familiar with Funding Circle, the company could possibly bring the FlexiPay concept to the US once they’ve fully rolled it out in the UK.
Funding Circle US revealed originations of £581M in 2020, equivalent to about $800M at current exchange rates. More than 90% of the company’s American borrowers were making full regular payments on their loans, Funding Circle reported. Approximately 7% were on a “payment holiday” at year-end or were not paying.
Funding Circle’s US loans generate low annual returns, its highest being a projected return of 4.1% to 4.9% for its 2016 cohort. Its 2020 cohort is projected to generate an annual return of between 1 – 3%.
Overall, Funding Circle reported a total net loss of £108.1M (approx $150M US) on just £103.7M in revenue, a massive loss that stemmed entirely from the first half of the year, attributed mostly to a write-down in “fair value.”
Funding Circle’s primary market is the UK. When comparing the market with the US, the company said that the US is in an earlier stage of development even though the market is 5x larger.
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