FUNDING Circle has launched its first euro-denominated fund, providing institutional investors with the opportunity to fund German and Dutch small- and medium-sized enterprise (SME) loans.
The publicly-listed peer-to-peer business lender is aiming to raise at least €200m (£179m) for the fund over the next 18 months. Two Finnish insurance companies and Funding Circle have together committed an initial €40m.
The Funding Circle European SME Direct Lending Fund I will target institutional investors such as pension funds and insurance companies for investment in a portfolio of SME loans in Germany and the Netherlands.
It is similar to a UK-focused fund that Funding Circle launched in June and will also target annual returns of between 5.5 per cent and 6.5 per cent for investors.
The new European vehicle has an eight-year, closed-ended structure and is Funding Circle’s first vehicle to be denominated in euros.
“We are very pleased to be giving more investors access to the small business segment of the private debt market,” Sachin Patel, chief capital officer at Funding Circle said. “This is the first time that investors can invest in German and Dutch SME lending through a closed-ended fund.”
Direct lending funds have traditionally focused on the middle market, with loans ranging between €50m and €250m in size, Funding Circle said.
Loans through the Funding Circle platform in Holland and Germany are made to established SMEs that have been trading for around 15 years and seek to access an average of €60,000 in debt finance.
Earlier in July, Funding Circle halved its revenue growth forecast for 2019 due to economic uncertainty and lower demand for its business loans.
The company said in a half-year update that it is anticipating revenue growth of around 20 per cent for the year, compared with previous guidance of 40 per cent, sending its share price down by nearly 30 per cent by the afternoon of the announcement.