Funding Circle publishes 2019 Full Year Results
As a public company, each March and August we publish our Full and Half Year results. Following today’s publication of our 2019 Full Year Results, we wanted to take a look back over some of last year’s highlights, and update you on some of the exciting things we have been working on.
2019 review of our UK business
A record £1.6 billion was lent to small businesses through the Funding Circle platform in 2019. At the end of the year, tens of thousands of small businesses were benefiting from more than £2.6 billion in loans under management; including a school uniform supplier in Bridgend, a bridal shop in Essex, and a windsurf instructor on the Sussex coast. Your lending is directly contributing to the jobs, tax receipts and economic growth these businesses create.
2019 was also a year of challenge, economically and politically, for the UK —which we were not immune to. Our Chief Risk Officer has previously discussed how we proactively tightened lending in response to some higher risk band loans showing lower returns due to the macro environment. While this affected the proportion of borrower applications that we could accept and our revenue growth expectations for the year, this prudent step protected investor returns. The early signs have been positive, with the chart below showing the percentage of loans, three months after being taken out, that were 10 or more days late.
Percentage of loans (by loan amount) 10+ days late, 90 days from origination
Loans originated in 2019 are expected to deliver annualised returns of 5–7%.* In times of uncertainty, it’s important we are prepared to do the right thing for the long term future of the business—and the investors who lend through our platform—even if it means slowing growth or affecting our profitability in the short term. We will continue to take this approach in the future. While it’s too early to predict any impact of the ongoing development of the coronavirus, we are continuing to monitor the situation very closely and are prepared to make prudent and timely adjustments where necessary.
Continuing to deliver for investors
As part of our strategy to diversify funding sources, we further widened the universe of investors who lend through our platform in 2019 by launching new institutional investor products; including a Funding Circle-sponsored, asset-backed bond programme and a UK Economic Impact Fund. Continuing to deepen and diversify our sources of investor funding will help to ensure Funding Circle continues to channel funds to small businesses throughout each stage of the economic cycle.
For retail investors, we also made improvements to the secondary market in December; providing investors with an equitable and more regular way of accessing available liquidity. We’re pleased that these changes are enabling all investors who wish to access their funds early to sell loans regularly.
Helping more businesses access the finance they need to grow
Over the last ten years 57,000 UK businesses have accessed more than £6.2 billion in finance through Funding Circle. In the last three months of 2019 net lending to small businesses—the difference between new lending and repayments received on existing loans—through Funding Circle was higher than the major UK banks combined.
However, we know there are more small businesses who we can serve. To help achieve this, in 2019 we introduced a major platform innovation; the completion of the initial build of our new instant decision lending platform. This will provide a best-in-class borrower experience, enabling greater speed and ease of access.
The new platform includes historical data on approximately 1 million loan applications from the last ten years and is powered by Funding Circle’s 8th generation of artificial intelligence-enabled credit models. By utilising best-in-class technology and data analytics, we can deliver a revolutionary borrowing experience without compromising our assessment process. We are piloting this new technology for a small number of businesses initially, and will begin rolling out this market-leading functionality to approximately 50% of businesses by the end of 2020.
We are well-positioned for a successful 2020
Our work over the last twelve months has put Funding Circle in a strong position that will allow us to serve our customers well. Investments in our data and technology capabilities will help us deliver improved investor returns, deep and diverse sources of funding and an unbeatable borrower proposition.
In 2019 we grew group revenues by 18% to £167 million, while our UK business—our largest—delivered an operating profit in the second half of last year, with revenues of £108m. Following our Initial Public Offering, Funding Circle is the best-capitalised lending platform in the UK.
We also operate in the US, Germany and the Netherlands; whose markets are collectively six times as large as the UK**. In the US, our lending to small businesses would place us inside the top 50 largest US banks. In Europe, we are reorganising our German and Dutch businesses towards a new model that is better suited to those markets and will help accelerate our path to group profitability. We are well-positioned for a successful 2020.
By lending to businesses your capital is at risk. Not covered by the Financial Services Compensation Scheme.
The Funding Circle team
*Projected returns as of 31st December 2019. The projected annualised return shows the return, after fees and bad debt, that loans are currently estimated to achieve. Loans are shown by the year they were taken out. The return is calculated by combining the actual annualised return received to date, and our latest return estimates, including expected recoveries, for the remaining term of loans that have not yet been fully repaid. Past performance is not a guarantee of future returns and by lending to businesses your capital is at risk.
**Source: OC&C estimates