It’s not been a quiet few years for small business lenders.
When covid struck in 2020, a host of non-banks found themselves thrust into the public consciousness alongside the big High Street lenders as small companies scrambled for a cash lifeline through lockdowns.
The reception was a largely positive one; some even took on something like the glow of knights in shining armour as they funnelled tax payer cash into struggling firms.
This year though, as another crisis rocks the UK economy and firms grapple with soaring costs, companies like listed fintech lender Funding Circle have had to take a more hard-headed approach.
Lisa Jacobs talks with the tone of a well-prepped chief executive in control, and Funding Circle has been assertive in restoring discipline in who it lends to.
“The proportion of businesses who are late [paying back their loans] is about three per cent, which is in line with what we’ve had historically […] and much below what we were at the height of the pandemic,” Funding Circle chief Lisa Jacobs tells City A.M. in an interview.
“But we are prudent around our lending going forward.”
Prudence may point to the slowdown in Funding Circle’s lending book over the past year as it adjusts to life beyond the pandemic. But even with a post-covid reset, she says the firm – one of few listed fintechs in London – has big growth plans in the works.
Jacobs is atypical in some ways as a fintech chief. While some bring fanciful visions of upending industries, she brings the discipline of a consultant, having joined the firm in 2012 after a stint with the financial services division of the Boston Consulting Group.
When she joined as chief strategy officer 12 years ago, Funding Circle was just an uppity fintech firm of forty people making waves in the small business lending market. But her role swelled alongside the firm, expanding first into UK managing director and then Europe managing director before taking the top job at the start of last year.
“I started running the UK businesses as managing director in 2019. Six months before COVID started that was a very… interesting experience,” she laughs.
“Obviously not exactly what I had expected when taking on that role.”
Funding Circle sprang to the call of government after it opened up its lending schemes to get money into SMEs. The firm dished out some £3bn under the flagship coronavirus business interruption loan scheme, as well as £900m under the recovery loan scheme and £34m under the more controversial bounce back loan schemes.
The performance of those loans has also been under some scrutiny. According to government numbers at the start of the year, Funding Circle had called on £87.9m from the government to guarantee wobbly loans, with 706 defaulted.
Funding Circle has since reined in its lending and in its recent set of numbers last week said total loan book had dipped from £4.07bn in the first six months of last year to £3.48bn in the same period this year, although its UK book is profitable.
Funding Circle also swung to a pre-tax loss of £16.6m in the six months to June against a profit of £1.6m in the same period last year.
Jacobs, however, has chalked the loss up to a bumper covid comparator year and says the firm is exactly where it wants to be.
“There’s a couple of areas we’ve said that we’re going to continue to invest in – that the US loan business and flexipay [a buy-now pay-later type product] – and that was driving the loss,” she adds.
Targeting a US growth push might seem like a natural next step for a UK firm trying to crack the small business market. Jacobs says she’s even locked in a friendly competition with her US chief over who can grow the fastest.
But in the current climate, one of London’s few listed fintechs turning its attention across the Atlantic is enough to send shivers up City spines.
London’s market malaise has been fuelled in part by its inability to attract genuine growth companies to the market, and the argument most often follows that investors on these shores just don’t take a shine to them.
Funding Circle might be called exhibit A in that regard. The firm has suffered a torrid time since floating in 2018 under then chief and founder Samir Desai. Shares are trading down over 90 per cent on their IPO price and show no great signs of a rebound. Still though, Jacobs says she is unphased.
“We’re just really focused on building out the business. And we’re confident that more investors will follow as we do that,” she adds.
Will Funding Circle become the latest to throw out the threat of a dual listing in the US however, where tech firms are seen to fetch higher valuations?
“It’s all about execution. And that’s what we’re focused predominantly on,” Jacobs says.
“We haven’t explored a dual listing, it’s not something that we’re looking at now. We’re just really focused on building out that business.”
The insistence is unlikely to settle any nerves for the time being. But Jacobs says she is pleased with what she is seeing in terms of reform in London.
Changes to pension cash coming into the UK is a good thing, she says, a refresh of the London Stock Exchange is looking positive and political momentum is positive on both sides.
“We find when we talk with whether it’s Conservative or Lib Dem or anyone, we always find a lot of support for small businesses,” she adds.
“I don’t think a change in party would be would make a huge amount of difference to to that.”
But Jacobs words come amid a troubling time for listed businesses in the UK and London however.
Whether her words of reassurance to the capital will be heeded is yet to see.