NEWS
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Funding Circle prepares overseas target shortlist FUNDING Circle has a shortlist of five countries it is interested in expanding into, its chief strategy officer has revealed. The peer-to-peer business lending giant already operates in the UK, the US, the Netherlands and Germany. But Lisa Jacobs (pictured), chief strategy officer at Funding Circle, told Peer2Peer Finance News that the firm is now considering new geographies. She said there are four factors that Funding Circle considers when entering new markets: demand for small- and medium-sized enterprise (SME) borrowing;
investor sentiment; operational complexity including the regulatory environment; and credit data availability. Jacobs said the firm could enter new markets via organic expansion or acquisitions. Funding Circle entered the German market by acquiring Zencap in 2015. “Our aim is to help small businesses grow and become the first choice for small businesses globally,” she said. Jacobs declined to comment on specific regions but appeared to rule out areas such as eastern Europe, Africa and Asia for now, due to a lack of accessible data.
“Most P2P lenders in these types of regions are focused on the short term,” she said. “It is important for us that a region has accessible credit data so that we can maintain our own long-term lending business model.” Jacobs also said that Funding Circle may
consider launching investment funds in different countries, in order to diversify its funding sources. Within its home market, Funding Circle is not focusing on any specific regions or sectors, Jacobs said. However, she added that the platform’s data is “automatically indexing” to areas where banks have pulled away such as the north east and north west of England. “There is a myth that we are the lender of last resort,” she said. “People are coming to us out of choice because of the speed of our proposition and convenience.”
Insolvency reforms bring secured loans into focus THE TYPE of security taken by some peer-topeer lenders has come under the spotlight amid proposed insolvency reforms. Chancellor Philip Hammond announced in his 2018 Budget last month that HMRC would return to preferred creditor status in business insolvencies to ensure tax is collected. The taxman previously had preferred status but it was removed in 2002. The reform puts HMRC ahead of creditors that
have a floating charge as security, which could include some P2P lenders. Rural P2P business lender Folk2Folk said it does have floating charges in some cases, but also takes a fixed charge over land or property which takes first priority on a creditor list. “In some circumstances we take a debenture in the form of a fixed or floating charge as additional security and may also take directors’ guarantees on a loan to a company,” a spokesperson said.
Others take different approaches. Funding Circle said it has floating charges on a small minority of its larger loans but as most of its business is unsecured, it tends to focus on holding personal guarantees, which means they can pursue a company director or whoever is a named guarantor. Rather than a security, RateSetter takes ownership of an asset as part of its business lending. Some believe the
insolvency reforms may present an opportunity for P2P lenders. “The significant issue will be the banks’ response and whether HMRC’s upgraded status will further dampen appetite to lend to small firms,” said Stuart Lunn, chief executive of Edinburghbased P2P business lender LendingCrowd. “This is potentially a significant opportunity for alternative lenders to gain market share, as they can step in when banks are unwilling to lend.”