P2P Lender Funding Circle Addresses Investors’ Withdrawal Concerns

Peer-to-peer (P2P) British-based lender Funding Circle sent out a letter to investors after they were unable to take out funds from the platform.

The Financial Times is reporting the company told investors it was “a robust, well-capitalized business,” and that “we want to give you some reassurance that we are focused” in terms of recent difficulties.

The company connects retail and institutional investors with SMBs that are searching for loans and lets the investors take out money before the loans have matured. It does this by selling parts of the loan to other investors.

However, there has been a recent lack of demand, which means it takes much longer to finalize sales. It typically takes a few days to sell loan parts, but the duration has stretched into about four months since the beginning of 2019.

Funding Circle told new customers that the waiting period is likely to increase even more.

Funding Circle UK Managing Director Lisa Jacobs said the company was “the largest and best-capitalized lending platform in the U.K.” and that returns on investment were good. In terms of the slow pace of loan sales, she said, “We understand it is frustrating for customers so, whilst it is a feature of the platform model, we are conducting a review of the secondary market.”

Funding Circle anticipated the issue before it went public last year and said it might lead to “additional scrutiny by . . . regulators.” However, the company said it speaks to the Financial Conduct Authority (FCA) regularly, and that whenever it makes changes to the platform, it will “always engage with the appropriate regulatory bodies.”

The FCA said it wants to make standards better in the P2P space, and it believes a lot of investors don’t understand the risks involved with funding loans. In December, the regulatory body plans to introduce a new set of rules for corporate governance and advertising.