U.S. Branch of Funding Circle Acquired, Corporation Surrenders Small Business Lending Corporation License
Funding Circle Exits U.S. Market, Returns SBLC License
Funding Circle, a leading fintech company, has announced its exit from the U.S. market by selling its U.S. business to iBusiness Funding for approximately $42 million. As part of the deal, Funding Circle has returned its Standby Letter of Credit (SBLC) license, effectively ending its regulatory capability to issue SBLCs in the U.S. market.
The SBA approved Funding Circle's SBLC license for 7(a) lending in April 2023, making Funding Circle the first fintech to receive an SBLC license in over a decade. However, the company's recent move can be seen as a setback for SBA administrator Isabel Casillas Guzman.
Funding Circle's CEO, Metcalf, feels that pushing for the SBLC license was worthwhile, but the strategic refocus on the UK and institutional lending markets led to the decision to sell the U.S. business. The company remains regulated by the UK's Financial Conduct Authority (FCA) and has been shifting away from peer-to-peer lending to institutional lending since 2022.
iBusiness Funding, which processes more than 1,000 business loan applications through its platform daily, will operate Funding Circle's U.S. unit under its current name for at least six months, and then transition to operating under iBusiness Funding.
The sale of Funding Circle's U.S. unit was one of the companies in talks when its CEO Lisa Jacobs said in March that it was considering offloading its U.S. counterpart to streamline its operations. The company also announced plans to cull 120 roles within its workforce in an effort to curb costs.
The SBA might award additional SBLC licenses to increase competition, and Senate Small Business and Entrepreneurship Committee Ranking Member Joni Ernst and House Small Business Committee Chairman Roger Williams have expressed concerns about how Funding Circle got its SBLC license. Metcalf suggests buying an existing SBLC license to avoid political issues.
Despite the sale, Funding Circle's U.S. unit reported a statutory profit before tax of £7 million for 2023 but contributed an overall loss of £23 million to the group's results. The U.S. unit will operate under its current name for at least six months, and then transition to operating under iBusiness Funding.
[1] Source: Funding Circle Press Release, 2023.
- The finance industry saw a significant shift when Funding Circle, a prominent fintech company, sold its U.S. business, primarily involved in business financing, to iBusiness Funding for around $42 million.
- The exit of Funding Circle from the U.S. market marks the end of its regulatory capability in the business sector, as it has returned its Standby Letter of Credit (SBLC) license, a key regulatory tool in fintech.
