Funding Circle offloads US business for £33m in bid to stem losses

Small business lender Funding Circle has struck a deal to sell its US business to Florida-based iBusiness Funding (IBF) for £33m as it looks to stem losses and boost its struggling share price.

The fintech announced on Tuesday that IBF’s acquisition would include all the division’s loan portfolios and result in a £10m gain. The transaction is expected to close by the end of June.

Funding Circle said the proceeds from the transaction would be reviewed in line with its capital allocation framework. The London-listed firm’s shares rose as much as 17 per cent in early trading to their highest level since January 2022 following the news.

The company announced in March that it was looking to offload its lossmaking US division to simplify the group. The fintech’s shares have slumped 78 per cent since it floated in September 2018.

Funding Circle’s pretax loss widened to £33.2m in 2023, from £12.9m the previous year, after a push into the US and investment in its lend-now-pay-later offer Flexipay.

At the end of last month, Funding Circle said it expected to cut around 120 jobs as part of efforts to create “a simpler, leaner and better positioned UK focused operation”.

Lisa Jacobs, Funding Circle’s chief executive, said on Tuesday: “We are pleased that in IBF, one of the leading small and medium-sized business 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.”

She added that Funding Circle’s UK business was on track to be profitable in the second half of its 2024 financial year, in line with guidance.

IBF provides lending solutions for banks and other lenders, specialising in loans guaranteed by the US Small Business Administration (SBA). It claims to have processed more than $6bn (£4.7bn) in SBA loans since it was founded in 2013.

The business is a wholly-owned subsidiary of New York-listed Ready Capital Corporation, which has a current market capitalisation of $1.45bn (£1.14bn).

Justin Levy, CEO of IBF, 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.”

Updated with shares