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How Funding Circle is helping small businesses face the challenges of Brexit

The team at Funding Circle tell Prospect what they can offer that the banks can't—and why investors are still eager to do business in the UK

By Prospect Team  

Set up in 2010, Funding Circle was designed to meet the needs of small businesses, matching potential investors with business owners who found traditional banking burdensome or unsuitable for their needs. By acting as an intermediary, like Uber or AirBnB, they’re able to offer the choice to small businesses that has traditionally been offered to large corporations—with huge ramifications for UK business, and through that, the well-being of society. We sat down with Funding Circle to ask them about what they do, how they do it, and what comes next after Brexit.

Tell us a little about why you set up Funding Circle.

We launched Funding Circle just over 7 years ago, in August 2010. The idea was simple: small businesses are very underserved by banks and traditional finance companies. It takes a long time to get a loan; there’s no transparency over price or in disclosing all the costs of a loan—and a lot of banks don’t really like working with them. Banks tend to make more money out of things like large corporate loans, mortgages or credit cards.

“There’s a big disconnect between how the financial system is set up and what society needs.”

Yet small businesses are very important for society: they account for 50 per cent of private sector GDP, and 60 per cent of the private sector workforce. Most of the job creation since the crash in 2008 has come from small businesses. There’s a big disconnect between how the financial system is set up and what society needs.

At the same time, we saw that investors were getting low returns on their money; they were increasingly losing trust and satisfaction with banks. We felt maybe there was a way to bring these disaffected parties together on a platform like E-Bay or a stock exchange, which could create a better deal for both sides.

So what’s happened in the years since?

Fast forward to today, we’ve originated over £3.2 billion worth of loans through the platform. In the UK, that lending has helped create about 60 thousand jobs, and the £2.5 billion of loans has created about £5 billion of GDP or gross economic value added, according to an independent survey by the Centre for Economics Business Research.

In fact, we think we make up about 2 per cent of the small business lending market. Also, if you actually look at the money going into the economy, we make up about a third of net new lending— which is the preferred Bank of England measure. We did about 300 million versus 600 million from the entire banking system in the first half of this year.

In terms of new money going into the economy and new job creation, the impact is very, very large.

We’ve expanded our business beyond the UK, too—we now operate in the UK, US, Germany and the Netherlands.

What we’ve been able to do is democratize access to loans to small businesses. We’ve got about 70 thousand individuals on the platform—that creates choice for our users.

Say a small business decides to come to you: what is it they’re getting that they don’t get with a bank?

We try to be faster, better and cheaper. We turn around loan applications typically within 24 hours. We are better in that we give better service; every small business owner has a dedicated account manager.

We’re cheaper, in that our prices are competitive, and often we’re often providing cheaper loans than businesses would be able to get at the bank. We also don’t have the overheads that banks have.

“We operate like AirBnB or Uber—so we can match our clients more efficiently than a bank”

We’re a very efficient intermediary in the middle, very much like AirBnB or an Uber. We don’t hold inventory, which allows us to match much more efficiently than the bank.

94 per cent of businesses that approach say they would always come back to us first in the future rather than go to the bank.

That just gives you a sense of how much a better experience it is than what they’re used to.

We all know that Brexit is going to shake up the financial sector. What can Funding Circle do to help businesses rise to the challenge?

Net lending by banks fell to 220 million in Q4 last year. Ours actually rose to 167 million in that same period. We have been able to fill the void left by banks; whenever there’s any uncertainty banks tend to put up the shutters. We’ve grown tremendously since the EU referendum, and what’s also interesting is that we’ve seen a number of new types of investors.

The UK government has been able to put in another £40 million through Funding Circle on top of the existing £60 million they’ve already funded to directly stimulate the UK economy. That’s the first time they’ve been able to bypass the banking system and go straight through to businesses.

“Despite Brexit, there’s a vote of confidence in the UK economy”

On top of that, we’ve also had large insurance companies like Aegon, which is a big Dutch insurer, commit to fund £160 million in year one, but extend this into a four year funding program. The fact that a large foreign insurer would want to do that shows that, despite Brexit, there’s a vote of confidence in the UK economy, particularly in small business.

Are there ways you can use that confidence to work with banks?

We compete directly with banks but in some cases, we’re able to help them. There are a number of businesses that banks can’t actually help because their criteria doesn’t allow them to—that’s where we can step in.

We’ve got partnerships with Santander and RBS, and we’ve been able to fund about £20 million of loans to 226 businesses through those relationships—which allows banks to keep their customers happy.

Banks can also lend through our platform. We’re expecting to see a lot more of that because we’re so efficient, and we’re often hitting a type of customer that is very different to the traditional bank customer. A lot of small businesses operate online; they’re used to being online, and they want speed and flexibility; they also want to interact with brands that actually aren’t banks. We’re able to provide an avenue for those big banks to those companies.

That’s also what you see happening in the case of insurers like Aegon: rather than setting up the entire infrastructure, they can partner up with a platform like Funding Circle and be able to lend directly to the small business ecosystem.

In that sense, we’re not only helping banks meet a need, but bringing foreign direct investment directly into the UK economy, which is pretty valuable because that money would otherwise go to other places and other countries.

What comes next?

We’ve seen a huge amount of investment in the UK since the referendum, and we certainly feel like London will continue to be a hub, because of its concentration of talent—it’s just the nature of the city. 40 per cent of our tech team are EU citizens, and help from other areas is also very important. We’re also hopeful that access to government funds continues; the British government will hopefully be stepping into the gap left by the European Investment Bank.

“London will continue to be a hub”

There are certain types of roles or skill sets where we find there’s no great public opposition to immigration—for example, software engineers. If you put the burden on companies to comply with immigration laws, and provide them with ways to move very quickly, there could even be benefits in terms of talent to come from Brexit.


With the support of Funding Circle, Prospect will be hosting a private dinner at the 2017 Conservative Party Conference on what can be done to ensure that SMEs get the funding they need during times of economic uncertainty. Confirmed speakers include: Jon Bernstein, Associate Editor, Prospect; Samir Desai CEO and co-founder, CBE Funding Circle; Baroness Lucy Neville-Rolfe, Former Commercial Secretary to the Treasury; Bim Afolami MP Member for Hitchin and Harpenden; Eddie Hughes MP Member for Walsall.

If you would like to register your interest to attend our events or to find out more about our thought leadership programmes, please email Saskia Abdoh.


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