What does the future hold for Funding Circle?
Funding Circle sent shockwaves through the sector when the platform announced its exit from the peer-to-peer lending space earlier this month.
It was one of the oldest platforms, having been open to retail P2P investors for almost 12 years, and followed other recent P2P exits such as Zopa, Lending Works and Connective Lending.
Funding Circle has now reached a tipping point – the brand has been synonymous with P2P lending for so long that shareholders and investors will be keen to know how the company intends to shape itself going forward.
Read more: Funding Circle exit: Was the writing on the wall?
Since the company announced its P2P exit, its share price has been nearing to an all-time low as shareholders worry about the platform’s future.
Over the past two years the platform has focused on delivering institutional funding through state-backed Covid loan schemes, the coronavirus business interruption loan scheme, bounce back loan scheme and most recently the recovery loan scheme (RLS).
The RLS comes to a close at the end of June, so the platform cannot rely on government loan schemes for much longer. So, what does the future hold for the former P2P lender?
While it is disappointing to see Funding Circle leave the sector, the former P2P giant is on an upwards trajectory after beating its profit guidance to achieve a £64m operating profit for 2021.
Read more: Funding Circle’s P2P exit: The industry reacts
Unlike Zopa, Funding Circle does not intend to become a bank, highlighting it has proven that its platform model works.
Loans on the platform, such as small- and medium-sized enterprise (SME) term loans, will continue to be funded by a broad and diverse range of institutional investors.
And the lender will continue to make limited use of its balance sheet in certain scenarios, for example, to fund new products or co-invest in loans alongside investors.
Also, it will instead continue to refer small businesses it cannot help to its panel of around 25 third-party lenders it refers to as ‘marketplace lenders’.
Read more: Is it worth backing Funding Circle shares?
Funding Circle is also working on transitioning away from single products to become a multi-product platform that focuses on embedded finance.
Lisa Jacobs, chief executive of Funding Circle UK, told Peer2Peer Finance News that the platform is planning to focus on embedded finance through its partners.
In December, Funding Circle launched its first embedded finance solution, which allow borrowers to apply for loans up to the value of £500,000 through a series of partner websites, with decisions granted within seconds and money transferred within 48 hours.
Business finance platforms Funding Options and Capitalise were the first partners to add the API to their websites.
Last month, Funding Circle partnered with Chaser and in November with Tide, so customers of the credit control app and business bank can apply for a loan from the platform directly from their account.
Jacobs added the lender is planning to launch more products, and is committed to the roll-out of its FlexiPay loan, a buy-now-pay-later flexible payment facility launched in September, and its API lending as a service in the US.
Without retail investors and the RLS, Funding Circle is in no short supply of work.
Its marketplace and API will natively embed in partner environments, the platform will continue to offer term SME loans, funded by institutional investors and also continue to roll out its short-term FlexiPay product.
Funding Circle is still busy doing what it does best, lending to SMEs.