Funding Circle losses widen as bad debts in UK worsen
Higher costs offset rise in first-half revenue, UK-based lender says
Losses at Funding Circle deepened in the first half, as the business lender struggled with weak demand and an increase in bad debts in the UK, its largest market.
The London-based company’s pre-tax loss widened to £31m, from £27m in the same period last year. Revenues increased 29 per cent to £81.4m, but the rise was more than offset by higher costs, particularly for marketing and new staff.
The company warned in an unscheduled update last month that revenue growth would slow in the second half as it tightened lending criteria and cut forecasts for investor returns on its existing loans.
It gave more detail on the weakness in its full interim report on Thursday, explaining that in the UK, its largest market, around 15 per cent of its portfolio had been affected by a “deterioration in the consumer credit environment since 2016”. In particular, smaller and younger companies had suffered, leading it to tighten its rules for who it was willing to lend to.
Samir Desai, Funding Circle chief executive, said: “We remain confident in our aim to become the world’s largest small business loans provider, helping millions of businesses to create jobs and support economic growth. Small businesses remain underserved.”
Funding Circle was founded as a peer-to-peer lender, relying on retail investors to fund the loans that it originates. However, it has shifted focus in recent years with the majority of funding now coming from institutional investors.
The company’s initial public offering last year was considered a milestone for the young sector, but shares in the company have since fallen more than 75 per cent as investors have been discouraged by a series of downbeat updates.