Raising Finance

P2P lender Funding Circle outlines plans for £150m capital market fund

4 min read

24 September 2015

Former editor

Having lent £830m to British businesses since founding in 2010, fintech company Funding Circle intends to raise £150m via a placing on the London Stock Exchange to bolster future lending.

Its model to date has seen consumers lend directly to businesses through the Funding Circle online platform, deciding how much of a risk profile they want to adopt.

The business has raised $273m in venture capital though six rounds to finance expansion, with investors including Index Ventures, Union Square Ventures, Ribbit Capital and Accel.

Having launched its offering in the US during 2013, its Funding Circle SME Income Fund will reportedly provide investors with access to a “diversified pool” of loans originated through its marketplaces.

According to a statement, the target NAV (net asset value) total return will be 8-9 per cent per annum, while the target dividend yield will be 6-7 per cent a year.

Furthermore, Funding Circle is in talks with the European Investment Bank (EIB) in relation to a project to provide funding to UK SMEs via the UK marketplace.

London firm Funding Circle raises $150m in one of biggest VC deals in UK history

Samir Desai, CEO and co-founder of Funding Circle, commented: “This will be the first fund to exclusively lend to small businesses though the Funding Circle marketplaces, and is a response to the huge demand we’re seeing from a wide range of investors for small business loans.

“Today marks an important step on our journey to creating a global marketplace where any investor, big or small, can lend to small businesses across the world.”

Read more about Funding Circle:

After Funding Circle entered the record books on 23 April by securing a place as one of the top five venture capital investment deals in British history, Real Business caught up with Desai to find out the company went about closing its large funding transactions.

Back then, Desai said: “Growth on both sides of the Atlantic has been phenomenal. Investors are now lending approximately £40m per month in the UK, and $15m per month in the US. In the States investors have reached the same level of lending as Funding Circle in the UK after three years, in just 1.5 years.”

Richard Boleat, chair of the Funding Circle SME Income Fund, added: “Funding Circle SME Income Fund is a differentiated new entrant to the alternative lending sector, with unrivalled access to the Funding Circle marketplaces, a focus on small business lending in the UK and US, a conservative gearing policy and a competitive cost structure.”

As well as securing commitments from consumers, and soon to be the capital market, Funding Circle has been successful in obtaining funds from the government’s British Business Bank. It has twice secured capital (£40m and £20m) from the finance institution, set up by former business secretary Vince Cable, to help supplement its own activities.

Local councils including Lambeth, Camden, Islington and Spelthorne have also taken the step of parenting with Funding Circle on schemes aimed at improving access to finance for local businesses.