Accredited to join CBILS & COVID-19 update
17 April 2020
Funding Circle Holdings plc
ACCREDITED TO JOIN CORONAVIRUS BUSINESS INTERRUPTION LOANS SCHEME (CBILS) & UPDATE IN RESPONSE TO COVID-19
Embargoed until 7.00am, 17 April 2020
THIS ANNOUNCEMENT INCLUDES INSIDE INFORMATION AS DEFINED IN ARTICLE 7 OF THE MARKET ABUSE REGULATION NO. 596/2014
Funding Circle Holdings plc ("Funding Circle"), the leading small and medium enterprise ("SME") loans platform, today provides an update following accreditation to join the British Business Bank's (BBB) Coronavirus Business Interruption Loans Scheme (CBILS) and an update in response to COVID-19.
Accredited to join Government SME stimulus programmes in UK and US
● UK: Funding Circle has been accredited to join the British Business Bank's Coronavirus Business Interruption Loans Scheme (CBILS) to distribute loans with an 80% Government guarantee to UK small businesses. Funding Circle is the largest online small business loan provider in the U.K. and has originated over £6.2 billion of loans to 57,000+ businesses.
CBILS loans will be funded by Funding Circle and a combination of new and existing institutional investors. We expect to open applications within the next week once we have completed the required legal and operational setups with the BBB. We anticipate all lending will go through CBILS when we launch until further notice. As a result, we will pause all non-CBILS lending from retail and institutional investors to concentrate on supporting the Government's SME stimulus programme. For investors that are unable (retail investors do not qualify for CBILS), or choose not to participate in CBILS, they will continue to receive repayments from existing borrowers with funds returned on a monthly basis.
● US: As previously announced, Funding Circle has been approved by the U.S. Small Business Administration (SBA) and U.S. Treasury to originate Paycheck Protection Program (PPP) loans that are 100% guaranteed by the SBA. The program provides small businesses with forgivable loans up to $10 million to cover payroll costs, rent, mortgage interest, or utilities. Funding Circle has originated more than $3 billion to 16,000 businesses in the US. If Funding Circle were a bank, it would be one of the 50 largest small business loan portfolios in the US.
Additionally, we are exploring ways to further access Government-backed lending schemes including SBA Express loans and 7a loan programmes, which are also 100% guaranteed by the Government.
Samir Desai CBE, CEO and Founder said: "Small businesses are the heartbeat of our economy but many find themselves in need of financial support during this time of crisis. Funding Circle is uniquely positioned to use its advanced technology, risk and data analytics platform to help distribute funds to small businesses during this time of crisis. We stand ready to play our part now we have been accredited to both the UK and US Government SME lending programmes."
Update in response to COVID-19
The Group has a strong financial base and our balance sheet is robust. At 31 December 2019, the Group had net assets of £319.0 million, including cash of £164.5 million. As we continue to assess the impact of COVID-19 on the business, we remain focused on maintaining a substantial cash balance and anticipate only investing further cash in SME loans where necessary to support Government lending schemes.
The Group introduced new funding products in 2019 and carries the associated short and long term investments at fair value for loans and bonds that have not yet been sold. It is expected that the value of these investments will be impacted during the crisis period and potentially thereafter. However, at this stage it is not possible to adequately quantify either the short or longer term impact until more data is available and there is more clarity on the impact respective government initiatives will have on the post COVID-19 economy.
As stated at the FY results on 12th March, the year started well with the business seeing strong levels of demand from borrowers in both the UK and US through to mid-March. However, the second half of March and April to-date have been impacted by COVID-19. This was a result of the decision to proactively tighten credit whilst working to become accredited to both the CBILS and the PPP, and in order to allow us to better assess changing risk dynamics.
In direct response to COVID-19, we have implemented a number of actions to protect our people and our customers. We swiftly transitioned all of our teams to working from home with minimal disruption to our business. We have introduced a number of measures to protect investor returns, including actions on forbearance to help customers in difficulty. We will provide further details on the expected future performance of loans in due course.
Whilst we are pleased to have become accredited onto both the UK and US SME government stimulus programmes, it is not certain the level of demand we could expect to see from either programme, or how long they will last for. At this stage, given the increased uncertainty in the market, the Board believes it is prudent to withdraw financial guidance for 2020 until the outlook becomes clearer. We remain focused on our long-term priority of profitable growth and we will provide further updates on this progress later in the year.
Funding Circle Press Team
+44 (0) 20 3667 2245
About Funding Circle:
Funding Circle (LSE: FCH) is a global SME loans platform, connecting SMEs who want to borrow with investors and lenders in the UK, US, Germany and the Netherlands. Since launching in 2010, investors and lenders across Funding Circle's geographies - including retail investors, banks, specialty finance companies, asset management companies, insurance companies, government-backed entities and funds - have lent more than £8.5 billion to 80,000 businesses globally.
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