Copyright: Funding Circle
Peer-to-peer lending was going to be the next big thing in small-business lending, filling the gap left after the financial crisis a decade ago when many banks sharply curtailed their activity.
The idea was pleasingly simple, and also spoke to individual’s desires to support entrepreneurs and make money while doing so.
Funding Circle and other companies set up exchanges that matched lenders – often members of the public – with small businesses that needed money. It was hailed as a disruptive business model that would make life hard for the big banks, and tech investors swing behind it, making Funding Circle one of the first, and most lauded of Britain’s “unicorns” – private companies valued at more than $1bn.
All the while though, critics have sniped.
Peer-to-peer lenders would never be able to do the kind of due diligence that banks’ small business departments had done for years – and they would inevitably be left with the dross that had been passed over for bank loans.
Some investors carped that they had been matched with dud companies, while regulators have periodically issued warnings about the need for greater scrutiny of borrowing companies.
This morning’s unscheduled trading update from Funding Circle seems to flesh out some of those fears – a downturn has led the company to tighten its lending criteria. The share price neatly sums up investors new found caution – it floated on the London exchange just 10 months ago, at 440p a share. It now trades at 149p.
https://www.bbc.com/news/live/business-48800228
2019-07-02 10:39:41Z
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