The SME lender has issued a trading update striking an upbeat tone for its performance.
Funding Circle will make an expected £40m of profit at least in the first half of 2021, according to a trading update from the firm, marking tangible results of a profit-focused strategy partly implemented in the wake of the pandemic.
Higher origination volumes in the UK and the extension of the PPP scheme in the US is helping Funding Circle’s loan book stay stable and is performing better than expected so far this year, it said.
Samir Desai, CEO and co-founder of Funding Circle, says a good start to the year with trading stronger than anticipated means the SME fintech lender will see total income no lower than £120m, “well ahead of previous expectations.”
Like many alternative lenders, Funding Circle has pivoted during the pandemic by offering government-backed loans through the Coronavirus Business Interruption Loan Scheme (CBILS). It also saw a long term investment in automation come to the fore during 2020 with 50 per cent of its UK loans being fully automated by the end of 2020.
“Our machine learning and technology platform is transforming the small business borrowing experience and as a result of Covid we are seeing an acceleration in the adoption of online borrowing, which has opened up an enlarged opportunity for Funding Circle,” Desai said.
However, Funding Circle also said in th trading update that its forecasts “expect some credit stress as the UK and US economies reopen”.
“Whilst we remain mindful of the uncertain economic environment, we are well-placed to continue helping small businesses in 2021,” Desai added.
Revenues will over the course of the full year will depend on how quickly the economies recover in the UK and US, Funding Circle will transition to operating its core loan product alongside government guarantee programmes in the UK and US, and it expects some initial reduction in lending as a result.
But it says on an adjusted EBITDA basis, which strips out costs including social security and FX between the lender’s UK, US and developing markets, it will be profitable for the full year, with profitability skewed towards the first half of 2021.
To date Funding Circle says it has lent more than £12bn to 100,000 businesses globally.