24 June 2019
Funding Circle, the UK’s leading small business loans platform, today announced the launch of a new private direct lending fund which allows institutional investors to back small businesses and the UK economy.
The UK Economic Impact Fund* will give institutional investors including pension funds, insurance companies and local authorities, the opportunity to lend directly to SMEs, powering the UK economy whilst earning an attractive, risk-adjusted return.
As part of the launch, Merseyside Pension Fund will invest £30 million alongside Funding Circle, initially supporting an estimated 430** small businesses across the UK as a result. The private fund is a new way for institutional investors to lend to SMEs through an 8-year closed-ended structure, targeting an annualised net return of 5.5 - 6.5%*** and opening up further pools of capital to UK small businesses.
Small businesses (firms with fewer than 250 employees) are responsible for 50% of GDP in the UK,**** yet direct lending funds have traditionally focused on the private equity sponsored middle market (loans typically ranging between ~£20 million – £400 million*****). In comparison, the average loan accessed through Funding Circle is £70,000 by businesses that have been trading for approximately nine years. By leveraging technology and advanced data analytics, the UK Economic Impact Fund enables investors to directly support the real economy. In 2018 alone, investors lending through Funding Circle contributed £4 billion to the UK economy (measured in gross value added) and unlocked 72,000 jobs. For every £1 million lent, an additional £2 million was added to GDP.******
Sachin Patel, Chief Capital Officer of Funding Circle said:
Today’s announcement is further validation of the important role lending platforms play in making the SME loan asset class accessible to a wide range of investors. Through our latest UK Economic Impact Fund, investors can contribute to economic growth and job creation by supporting small businesses, whilst earning attractive, stable returns as a result. We welcome the opportunity to work with Merseyside Pension Fund as the lead investor and we look forward to welcoming more investors in the near future.
Linda Desforges, Senior Portfolio Manager at Merseyside Pension Fund said:
We view Funding Circle as the pre-eminent operator in the platform lending space and are pleased that through their infrastructure we can support small businesses whilst earning a good level of income for the Pension Fund.
By opening up small business lending to a wide range of investors, Funding Circle has improved competition in the market, supported job creation and reduced small business dependency on bank lending. Merseyside joins other investors in the UK including 81,000 individuals, the British Business Bank, the European Investment Bank and financial institutions such as asset management and insurance companies, who lend through the Funding Circle platform.
For more information
Funding Circle: firstname.lastname@example.org; +44 (0) 203 667 2245
NOTES TO EDITORS
*Funding Circle UK SME Direct Lending Fund I
**Based on the average loan size of £70,000
***After fees, losses, and recoveries
**** Oxford Economics, The Big Business of Small Business report, 2019
***** LexisNexis Market Trends: Middle Market Loans
******Oxford Economics, The Big Business of Small Business report, 2019
About Funding Circle
Funding Circle (LSE: FCH) is a global SME loans platform, connecting SMEs 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 90,000 retail investors, banks, asset management companies, insurance companies, government-backed entities and funds - have lent more than £7 billion to over 68,000 businesses globally. Funding Circle is a member of the FTSE 250 Index.
About Merseyside Pension Fund
Merseyside Pension Fund is the fifth largest fund in the Local Government Pension Scheme (LGPS) with £9 billion of assets under management. The Fund provides pensions for local government employees in the Liverpool city region.