Funding Circle is doubling down on its UK operations with the £33million sale of its loss-making US business to iBusiness Funding, LLC (IBF). The strategic move comes as the company aims to enhance profitability by concentrating on its more successful UK operations.
The company, which has helped more than 135,000 SMEs access more than £15billion in finance, will offload the unit to IBF, which lends to banks and small finance businesses and is part of US financial giant Ready Capital Corporation, for a total cash consideration of £33million including all loan portfolios.
According to CEO Lisa Jacobs, the decision to sell the US division aligns with the company’s plan to simplify its business and focus on profitable growth in the UK. She explained that the US business, despite its long-term growth potential, required substantial cash and capital to grow its Small Business Administration (SBA) loan proposition, which was not the best course of action for the Group.
By exiting the US market, Funding Circle can better allocate resources to its UK business, which is on track to be profitable in the second half of 2024 and has a more attractive growth and profitability profile over the medium term.
UK on track
“In March, I announced that we were simplifying the business by exiting the US and focusing on profitable growth in the UK business,” said Jacobs. “Alongside the UK restructuring actions announced in May, we are continuing to execute against this plan with the sale of the US business to IBF. The UK business is on track to be profitable in H2, in line with our guidance. Over the medium term we expect net income growth of 15-20 per cent compound annual growth rate with profit before tax margins of >15 per cent.
“Over the last decade, our US team has played a significant role in getting finance to America’s small businesses and I want to thank them for all the commitment that they have shown to our customers.
“We are pleased that in IBF, one of the leading SMB loan processors, we have found a partner that shares in our mission and we look forward to seeing the success of the combined entity in issuing SBA loans to businesses across the US.”
Accelerate US progress
IBF has processed over $6billion in SBA loans to date, and the team processes over 1,000 business loan applications through its platform daily.
Justin Levy, IBF’s CEO, also commented: “Over the last 10 years, Funding Circle US has made a significant contribution to supporting US small businesses and together we will be able to accelerate progress to help even more businesses.
“We look forward to welcoming the team and continuing the important work of providing highly flexible and efficient funding solutions to US small businesses.”*
As the Ready Capital group already holds an SBLC licence, Funding Circle has, with SBA consent, also surrendered its SBLC licence.
