Update on Government Schemes
08 July 2020
Funding Circle Holdings plc UPDATE ON GOVERNMENT SCHEMES
Embargoed until 7.00am, 08 July 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 the British Business Bank's (BBB) Coronavirus Business Interruption Loans Scheme (CBILS) and the U.S. Small Business Administration (SBA) Paycheck Protection Program (PPP).
Samir Desai CBE, CEO and Founder said: "Our advanced technology, data analytics and originations platform is playing its part in helping thousands of small businesses to access important funds during this time of crisis.
Following our accreditation to CBILS, our UK business has reached its highest ever levels of origination and has represented 16% of approved CBILS loans since we joined the programme. Similarly, in the US we have helped protect thousands of jobs at small businesses through PPP loans.
Our focus as a group remains on delivering our long-term priority of profitable growth. Our U.K. business was operating profitably in H2 2019 and continues to make good progress. Given the impact of COVID, we are introducing changes in the US to accelerate the US business's path to profitability."
● Funding Circle was accredited to CBILS at the end of April and began participating in the programme in early May following the completion of legal and operational approvals.
● Since becoming accredited we have helped thousands of small businesses access much needed funds. We have approved c.£460m of applications through the CBILS programme and originated c.£300m as at 30 June. June was a record month for originations, up approximately 30% year-on-year.
● Funding Circle has represented approximately 16% share of the number of loans approved since we began participating in CBILS.
● Approximately 40% of loan applications have been serviced by our new instant decision lending technology. We are ahead of the expectations we had when we set out our end of year target at our results in March.
● We received an initial allocation of £750m for CBILS from the BBB and have completed, or are close to completing, funding agreements with multiple institutional investors, including banks, asset managers and insurance companies, to meet this, and any future, capacity.
● Additionally, we have recently received initial accreditation to start offering Bounce Back Loans to existing customers subject to final legal and operational approvals.
● Although the short term level of demand for CBILS and Bounce Back Loans is difficult to forecast, the company believes that COVID has led to an acceleration in the adoption of online borrowing by small businesses. As the largest online small business loan provider in the UK, this puts Funding Circle in a strong position to benefit from this trend.
● As mentioned in the trading update in April, we proactively brought down origination volumes during the second half of March and April whilst we waited to become accredited to join CBILS. During this time, we furloughed a small number of employees. Nearly all have since returned and we will not claim any money for this period from the Government under the furlough job retention scheme.
● Funding Circle was accredited to offer PPP loans on 15 April. Since launching, we have approved c.$800m and originated c.$300m of PPP loans, as at 30 June, with loans funded by both institutional investors on the platform and referrals to partner banks. On average we have earned a transaction fee of c.2.5% on originations, and the scheme is currently scheduled to end on 8 August. PPP provides 100% guaranteed forgivable loans to small businesses. We are currently providing access to the SBA's longer term loan guarantee product via a referral model and it is our intention to continue this in H2 2020, as well as reintroducing our core SME borrowing product.
● In order to accelerate the business's path to profitability, we are introducing changes in H2 2020. This includes centralising our US technology team in the UK, moving our sales and marketing teams to our Denver office and workforce reductions in aggregate resulting in a net reduction of c.85 roles.
● Since the start of lockdown, we have increased resources on our front line teams and provided some borrowers with short term payment holidays where they have needed them. We continue to work closely with all existing borrowers to help them during these uncertain times and the actions we have taken so far show we are making progress.
● As mentioned in the April trading update, we launched new funding products in 2019 whereby we aggregate loans in warehouses before selling them as bonds to investors. We carry these associated short and long term investments at fair value for loans and bonds that have not yet been sold. As a result of the impact of COVID, we continue to expect the value of these investments will be impacted however at this stage it is too early to quantify the total impact.
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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