British peer-to-peer lender bags US$100 million despite industry hiccups and Brexit
Funding Circle was cash flow positive at the end of 2016 as competition increases in lending
U.K. peer-to-peer lending start-up Funding Circle has raised 82 million pounds (US$100 million) in a vote of confidence for the young industry even after the Brexit vote last year.
The round was led by global venture capital firm Accel with participation from existing Funding Circle investors including DST Global, Index Ventures and Temasek.
“We are a fintech business and we are all about delivering a world class service to businesses and investors and to make sure we have the best product we imagine. We wanted to raise more funds to invest in our technology,” James Meekings, co-founder of Funding Circle, told CNBC by phone.
Online peer-to-peer lending is a relatively new way for businesses to access capital. A firm can apply for a loan on Funding Circle and is then matched with investors who could be a mixture of individuals, government or large financial institutions. A business makes repayments to Funding Circle with interest which is then distributed to the investors.
Funding Circle said lending through the platform passed 2.5 billion pounds (US$3.07 billion) globally in 2016. The company has offices in London, San Francisco, Berlin and the Netherlands. Britain is the biggest market for Funding Circle with 800 million pounds (US$981 million) of its total 1.1 billion pounds (US$1.35 billion) given to small businesses being lent through the U.K. platform.
But Funding Circle is facing increased competition in the peer-to-peer as well as broader lending space. Services such as the U.K.’s Funding Tree, or crowdfunding services like Seedrs pose competition to Funding Circle, while it also comes up against other rivals like Zopa.
The market is set for continued growth of around 53 per cent per year between 2016 and 2020, according to analysis firm Research and Markets, but the industry hasn’t had a smooth path. U.S. peer-to-peer firm Lending Club was plunged into crisis last year after an internal review found issues with the company’s lending practices which led to the firing of CEO and founder Renaud Laplanche.