Funding Circle expects to be profitable going forward as lending reaches £4.2bn

By Oliver Smith on Thursday 25 March 2021

Alternative Lending

A host of new lending products are planned for 2021.

Funding Circle expects to be profitable going forward as lending reaches £4.2bn
Image source: Samir Desai/Funding Circle.

As its lending jumped in the second half of 2020, Funding Circle turned an operating profit for the first time of £7.2m, a trend the lender says it expects to continue.

“We hit profitability in-line with what we always said we would,” CEO and founder Samir Desai told AltFi. “It proves the model and gives us a really good platform now with our strong balance sheet.”

Desai said Funding Circle had seen a “huge acceleration” in the shift to online lending over the past 12 months prompted by Covid-19, giving the lender “tailwinds that we’re excited with.”

Funding Circle’s loans under management grew 13 per cent across 2020 to £4.2bn, with originations up 17 per cent to £2.7bn.

According to Funding Circle’s Adjusted EBITDA metric—which strips out costs including social security and FX between the lender’s UK, US and developing markets— the business turned a £20.3m profit in the second half of the year.

Desai said the business expects to remain AEBITDA profitable going forward.

Across the group operating expenses were cut by 12 per cent to £191.3m, largely coming from savings around marketing and staff costs.

This morning Oxford Economics also published its Funding Circle Economic Impact Report, which showed that the lender contributed £7.5bn to UK GDP in 2020 through its loans which supported 100,000 jobs.

As well as increased lending and cost reduction, Funding Circle also made savings as it significantly increased the automation of its lending, with 50 per cent of its UK loans being fully automated by the end of 2020.

The lender’s long-term goal is to get this to 80 per cent in the coming years.

“It’s taken us 10 years to get to this point,” said Desai. “It’s easy to automate at high rates, but ours are at comparable or cheaper rates than to banks. That process is so much better than what’s available anywhere else.”

Average loan applications were completed in just 6 minutes with decisions in 9 seconds, paving the way for Funding Circle to launch a lending API later this year so small businesses can access finance in more places.

Other upcoming products include a new payment finance product and a spending card for borrowers.

Desai told AltFi that on the product front we should expect to see “more innovation in the next 12 months than in the last 10 years.”

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