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Should you buy shares in Funding Circle?

24/09/2018

Should you buy shares in Funding Circle?
Peer-to-peer lender Funding Circle has announced an intention to float on the London Stock Exchange. With the share issue being actively marketed through several retail stock brokers, our research here takes an in-depth look.

Funding Circle calls itself a global SME loans platform, connecting SMEs (Small-to-Medium Enterprise) who want to borrow with investors, who want to lend in the UK, US, Germany and the Netherlands.

Since launching in 2010, investors across Funding Circle’s geographies – including more than 80,000 retail investors, banks, asset management companies, insurance companies, government-backed entities and funds – have lent more than £5 billion to over 50,000 businesses globally.

It’s an admirable business offering, which has stepped in to support SMEs where many banks have feared to tread and also offered lenders a far more attractive rate of return than they might have achieved through traditional savings channels.

- Key difference to other lenders

The key difference to traditional lenders is that Funding Circle operates a lending ‘platform’, without actually holding the loans on its own balance sheet.

It generates revenue in two primary ways:

(i) a transaction fee typically…

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