The European Investment Bank (EIB) has agreed to invest £100m through the Funding Circle platform, which comes alongside a £25m investment in the Funding Circle SME Income Fund.
Funding Circle and the EIB have been in talks for several years over the latter investing in UK SMEs through the platform. Those talks have now come to a head in the form of a £100m direct lending investment. The European Investment Fund, part of the EIB group, will also be investing £25m in the SME Income Fund SPV. This investment will not count against the Fund's borrowing limit of 0.25 x NAV, but will effectively provide a leverage facility which should “significantly contribute” to enabling the fund to hit its target return of 8-9%. These investments will enable the EIB to fund “over £200m” in new loans through the Funding Circle platform over the next 7 years.
We first caught wind of the EIB’s involvement in the SME Income Fund in March, when the fund published an update stating that it was engaged in talks with the entity about “securing a financing facility”. Funding Circle floated the SME Income Fund on the London Stock Exchange in November 2015, raising £150m. Nearly 90% of that capital has now been deployed.
The European Investment Fund guaranteed the senior tranche of Funding Circle’s landmark securitisation – the SBOLT 2016-1 – in April. That same senior tranche was sold to the German development bank KfW. Funding Circle also enjoys the backing of the British Business Bank in the UK, which has made multiple funding commitments to the platform. Funding Circle has lent of over £1.3bn to UK businesses to date, according to the Liberum AltFi Volume Index UK.
Jonathan Taylor, Vice President of the EIB, expanded on the impact of the agreement: “Investment by small businesses drives economic growth, and simple, efficient access to finance is essential to help small companies to expand, create jobs and harness new opportunities. This new and exciting partnership with Funding Circle demonstrates the European Investment Bank’s firm commitment to seeking out new ways to stimulate business investment across Europe. The £100 million backing will not only unlock over £200 million of new investment by small businesses across the UK, but also provides an innovative model for supporting SMEs that could be used elsewhere in Europe.”
With the EU referendum looming, Funding Circle sees the EIB’s latest involvement in backing UK businesses as a strong case for the Remain campaign. The EIB has provided over £3bn in investment to UK SMEs to date. Some of the UK’s largest alternative finance platforms weighed in on the potential impact of a Brexit last week, landing decidedly on the side of the Remain campaign.
Samir Desai, CEO and co-founder of Funding Circle, offered his thoughts: “Our partnership with the European Investment Bank is the first of its kind and represents another important step on our journey to creating a global marketplace where creditworthy businesses borrow from a diverse range of investors. This significant investment will ensure more businesses access the finance they need to grow and will help support economic growth and job creation across the UK.”
AltFi is returning to Amsterdam for its second annual Summit in the city. The inaugural event last year was a roaring success, with key figures from across Continental Europe's alternative finance and digital banking sectors highlighted. These included Jeroen Broekema, managing director of Funding Circle Netherlands, and Mieke van Engelen, head of innovative partnerships at ABN AMRO's standalone lending platform, New10.