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The economic effect of alternative finance lenders Funding Circle

Now operating across Germany, the Netherlands, the UK and the USA, Funding Circle is an alternative finance platform that facilitates peer-to-peer lending to small and medium-sized enterprises (SMEs). Founded in 2010, Funding Circle rose to popularity as an avenue for SMEs to raise funds in a period where banks were drawing back their support for such businesses, and their recent global impact study quantifies trends in bank lending alongside the impacts of online lending. 

Their study uncovers the disadvantageous circumstances SMEs have battled since the 2007/08 Global Financial Crisis, naming adverse fee structures and the lower stock of bank loans when compared to their larger counterparts as key hurdles for SMEs to overcome when accessing funds from banks. This has led to a greater appetite in SMEs for alternative financing, and in particular, online lending.

As of December 2017, Funding Circle estimates their loans under management had contributed GBP 3.9 billion annual gross value added  to Gross Domestic Product (GDP)in the UK, and enabled a further 75,000 jobs.

The UK is their greatest market by loans under management, and for the second straight quarter (Q3 and Q4, 2017), Funding Circle executed more high net loans to SMEs than the entire UK banking system. This market credits Funding Circle with a far simpler and faster application process as the key advantage in comparison with traditional financing options.

Locally in the Netherlands, Funding Circle is beginning to gain traction as the three major banks continue to decline the value of lending to SMEs, and similarly the simple and fast process were named as the key benefits of the platform. In total, Funding Circle is estimated to have supported a EUR 65 million gross value added contribution to the Netherlands’ GDP in 2017, and enabled 900 jobs.

The full report can be found here.

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