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Peer2Peer Finance News | August 25, 2019

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Funding Circle fund secures £150m British Business Bank facility

Funding Circle fund secures £150m British Business Bank facility
Marc Shoffman

THE BRITISH Business Bank (BBB) is set to back up to £150m of loans on the Funding Circle platform, through the peer-to-peer lender’s listed investment fund.

The state-backed bank will provide the facility in the form of a senior, floating rate loan to the Funding Circle SME Income Fund (FCIF).

The money will then be lent to small businesses via Funding Circle’s P2P platform.

The BBB loan will be drawn down over an 18 month period, after which there will be an 18 month reinvestment period.

The facility has a 12-year legal maturity, but analysts have said they expect it to be paid off before then.

The transaction, which is part of the BBB’s ENABLE Funding programme, is designed to accelerate lending to small businesses and is expected to support the growth of more than 2,000 UK firms.

The new commitment, first touted in July, extends the existing partnership between Funding Circle and the UK government.

Since March 2013 £165m has been lent through Funding Circle using the BBB.

“We have supported the growth of P2P lending as a model since its earliest stages,” Keith Morgan, chief executive of the BBB, said.

“It helps provide welcome choice and competition and we are pleased that this part of the market continues to expand significantly, with volumes increasing by a further 51 per cent in 2017.

“By making this new commitment, more smaller businesses across the UK can get the finance they need to fulfil their growth potential.”

Read more: European Investment Fund and KfW back Funding Circle securitisation

Sachin Patel (pictured), chief capital officer at Funding Circle, said the UK government, through the BBB, has been a “pioneer of innovation” within the fintech industry.

Analysts heralded the deal.

“It is encouraging to see the BBB continuing this relationship through a facility with FCIF,” Numis said in a note to investors.

“In addition, this appears positive for FCIF because it will maintain its leverage around the 50 pe cent limit, which should enhance returns.”

Numis added that it is difficult to assess the full implications for FCIF’s returns given that the interest rate on the facility has not been disclosed, but the fund has said it will look to refinance the debt on the public markets.

Read more: Funding Circle SME Income Fund readies prospectus for more share issues