SME lender Funding Circle reports $83m profit for 2021

By 2021, the company was predicting it would be profitable as well as launching later in the year a BNPL-like proposition for SMEs and an embedded finance solution

Funding Circle, one of the UK’s first fintech companies, has reported its first full-year profit for 2021 following a two-year cost-cutting and growth strategy.

The listed alternative SME lender says it banked £64m ($83.81m) of profit for 2021. Like many alternative lenders, it faced an uncertain future at the start of the pandemic in the face of vast areas of the economy shutting down and spiralling economic uncertainty.

It pivoted strongly towards offering government-backed lending schemes aimed at helping cash-strapped SMEs in the coming months and also began to increasingly automate its lending after a multi-year investment in its technology stack.

By 2021, the company was predicting it would be profitable as well as launching later in the year a BNPL-like proposition for SMEs and an embedded finance solution.

The moves seem to have paid off.

Costs are down 12 per cent, compared to 2020 and its net income now stands at £235.5m ($308.39m) compared with £103.7m ($135.80m), up 127 per cent in 2020. Loans under management now stand at £4.46bn ($5.84bn), a 5.8 per cent uplift in 2020.

Originations for last year were down, however, at £2.3bn ($3.01bn) compared with 2020 when they were at £2.74bn ($3.59bn), a 16 per cent year-on-year fall as government-backed schemes were withdrawn.

Overall AEBITDA was £91.8m ($120.21m) compared with a 2020 loss of £63.8m ($83.55m). It now has net assets of £288m ($377.14m) compared to £217.6m ($284.95m) in 2020, up 32 per cent. £224m ($293.33m) of this is cash.

Lisa Jacobs, Funding Circle’s new CEO, said 2021 was a successful year for the company with over 70 per cent of UK applications now receiving an instant decision.

SMEs are increasingly using digital channels to manage all aspects of their business and this trend is here to stay. Our focus for the last two years has been on profitable growth and today’s results highlight the excellent progress we have made, Jacobs said.

I am particularly proud to announce AEBITDA of £92m ($120.47m) and £64m ($83.81m) of operating profit, exceeding our previous guidance. We are in a strong position as a business and as we look ahead to the rest of 2022 and beyond, there is a bright future ahead of us. A decade of R&D is now coming to fruition as we begin to empower small businesses to not only borrow, but pay and spend as well, she added.