It has become the first P2P platform to float its own fund. The online marketplace’s SME Income fund will invest in small business loans originated on the P2P lender’s platforms in the UK and in the US. The fund will target an annualised dividend of six to seven per cent without using leverage and will set itself apart from existing players by charging no fund management or performance fees.
Funding Circle will pay a one per cent annual servicing fee to use the platform like all lender-investors, which makes up an underlying charge.
In the past five years, Funding Circle has leant £741m to thousands of businesses across the UK and US, operating much in the same way as some of the world’s most successful tech companies. It recently added banking industry veterans to the executive team, with the previous head of global risk analytics at Barclays, Jerome Le Luel, becoming global chief risk officer.
Manpreet Dhot joins as the new USA chief risk officer, after 13 years at American Express, where he had assessed consumer and commercial risk, including the company’s small business portfolio.
Dhot said: “Funding Circle has created a truly transparent marketplace that provides businesses access to affordable and appropriate credit products and investors the ability to build a diversified portfolio. This is a winning combination and I’m excited to join a company focused on serving the small businesses many banks have left behind.”
In April 2015, Funding Circle raised $150m for its Series E round from investment groups, led by New York based BlackRock and Russian VC firm DST Global. The latter is run by Yuri Milner, who had previously backed Facebook and Airbnb. Several previous funding rounds had been led by Index Ventures.
Co-founder and CEO Samir Desai recently pointed out that the internet had not disrupted financial services, “yet it is the biggest market in the world”. Funding Circle aims to buck the trend and provide greater choice beyond the incumbents. “Historically, they have delivered very low value to customers,” Desai added about financial services.
Growth in UK P2P lending has grown with significant institutional funding over the past year – £500m was lent to businesses, properties and individuals in the second quarter by members of the trade body Peer-to-Peer Finance Association.
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