US-based lending platform Funding Circle transfers ownership of its American division and surrenders Small Business Administration (SBA) lending license.
In a significant move, Funding Circle, a UK-based peer-to-peer lending platform, has announced the sale of its U.S. business to iBusiness Funding for approximately £33 million ($42 million). This strategic decision marks Funding Circle's exit from the U.S. market, allowing the company to focus solely on its UK operations and products[1][3].
The sale consolidates small business loan origination under iBusiness Funding, a specialist SBA lending platform owned by Ready Capital. iBusiness Funding has processed over $7 billion in SBA loans and processes more than 1,000 business loan applications daily[2]. For borrowers in the U.S., this may lead to a smoother or expanded access to SBA financing through iBusiness Funding’s lender network and partnerships[2][4].
Funding Circle's U.S. unit, which reported a statutory profit before tax of £7 million for 2023 but contributed an overall loss of £23 million to the group's results, will operate under its current name for at least six months before transitioning to iBusiness Funding[1].
The decision to exit the U.S. market comes after Funding Circle returned its Small Business Lending Company (SBLC) license to the SBA. This move suggests that Funding Circle is ceasing its regulated lending activities in the U.S. and relinquishing its regulatory authorization there[1].
The SBA, which issued 17 SBLC licenses, including one to Funding Circle, breaking a 40-year moratorium, is exploring options to increase competition and expand lending options for small businesses. This could include awarding additional SBLC licenses[3].
Metcalf, from Funding Circle, played a role in convincing the SBA to lift the moratorium on licensing and modernize the program rules. He feels that Funding Circle created a "unique niche" in the market and scaled in certain business segments over the past ten years. Metcalf notes that the SBA program is the answer to small-dollar lending, which Funding Circle could profit from if it had the guarantee[3].
However, Senate Small Business and Entrepreneurship Committee Ranking Member Joni Ernst and House Small Business Committee Chairman Roger Williams have expressed concerns about how Funding Circle received the SBLC license and will continue to monitor their participation in SBA lending[1].
Metcalf believes that buying an existing SBLC license would be a better strategy for those seeking the license today, to avoid political issues. He is proud of the Biden-Harris administration for taking on the banking lobby in the process of granting SBLC licenses[3].
In addition to the sale, Funding Circle revealed plans to cull 120 roles within its workforce to curb costs[1]. This move is part of a broader strategy to streamline the company's business toward regions and services where they may hold greater competitive advantage or regulatory comfort[3].
References: 1. Business Insider 2. American Banker 3. Financial Times 4. Intuit QuickBooks Capital
- The sale of Funding Circle's U.S. business to iBusiness Funding will likely bring changes in the fintech industry, as iBusiness Funding, a specialist SBA lending platform, expands its operations with over $7 billion in SBA loans already processed.
- Despite leaving the U.S. market, Funding Circle's exit opens doors for borrowers, potentially offering smoother or expanded access to SBA financing through iBusiness Funding’s lender network and partnerships, which process more than 1,000 business loan applications daily.
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