Small Business Lender Funding Circle Closes $198 Million Securitization
Even as small business lending approval rates have continued to tick upward since the Great Recession, alternative lenders have proven vital in helping businesses obtain the capital they need. These online lenders have taken on many forms — from utilizing peer to peer technology to developing unique algorithms for processing applications — but, in each case, they’ve provided entrepreneurs with faster access to funds. Now one marketplace lender, Funding Circle, has announced that it’s closed an asset-backed securitization of small business loans, potentially opening to door to further loan fulfillment.
Debuting in 2010, the London-based Funding Circle currently operates in the United Kingdom, United States, Germany, and the Netherlands. Stateside the platform has originated loans for 14,000 businesses that reportedly have an average of 11 years of operation under their belt and $1.4 million in sales annually. While this is the company’s fifth securitization of business loans globally (the other four occurring in the U.K.), it is the first for U.S. small business loans that originated on the site. The company reports that the transaction drew demands from 18 institutional investors including asset managers, insurance companies, private credit funds, and others.
In a press release announcing the transaction, Funding Circle U.S. managing director Bernardo Martinez commented on its importance, stating, “Funding Circle’s inaugural U.S. securitization is a major milestone in our journey to build the infrastructure where any institutional investor can efficiently lend to small businesses.” Martinez added, “With our global securitization program and sponsorship capability, we’re proud to expand access to a traditional fixed income asset class for new types and styles of investors, while also providing diversified funding for small businesses to grow and drive the economy forward.”
The announcement of the securitization comes just weeks after Funding Circle celebrated another notable accomplishment. Last month it was revealed that the company had lent more than $10 billion to small business worldwide. At the time Martinez remarked, “We are incredibly proud that Funding Circle has become small business’ first choice for loans. We look forward to continuing to build on the strong foundations we have put in place to help many more businesses in the years ahead.”
Overall Funding Circle’s ability to securitize loans originating from its platform is good news for small business owners. Considering how critical cash flow and capital are to the success of a business, having options for obtaining this funding is key. Therefore it’s exciting to see investors taking an interest in small businesses and looking to help them grow.