Today, Funding Circle announced a new partnership with Victory Park Capital. Victory Park, a U.S. based alternative investment firm with headquarters in Chicago, will be lending $420 million to small businesses across Funding Circle in both the UK and US over the next 3 years. This extends an existing relationship between the two companies. Funding Circle currently lends £40 million per month in the UK and anticipates this partnership will double that figure over the next 12 months.
This morning I reached out to Sachin Patel, who is the head of UK Capital Markets at Funding Circle to learn more. He had several interesting things to say. First, Victory Park is investing across the platform and not just cherry picking loans, which Patel says is a testament to their confidence in Funding Circle’s underwriting. Second, although this is a three year deal, there is an option to extend which means the investment could very well exceed $420 million.
Patel also mentioned that Victory Park has been investing on their US platform for several months now. While it is fair to assume that the majority of the investment from Victory Park will go the UK platform (given it is much larger than the US platform) Patel emphasized that this is very much a global deal targeting both UK and US platforms.
What is most interesting, at least to me, is that this deal will almost certainly involve leverage. The expected yields across Funding Circle’s UK platforms is between 7%-7.5%. While the US average is more than that it is still less than what a company like Victory Park typically targets. Patel confirmed that leverage is available and the expectation is that Victory Park will take advantage of that.
Clearly this is a big deal for Funding Circle with hundreds of millions of dollars committed but when I asked Patel what other deals he was working on he was not surprisingly coy. All he said was “There are many exciting projects in the pipeline, some with well known investors.”
Victory Park Capital is a Leader in Marketplace Lending
Victory Park, which has been dedicated to alternative investing since 2010 also has invested heavily in other marketplace lenders. In January of 2015, they announced they would invest up to £150 million in loans from another platform, Assetz Capital. Back in August of 2014, Victory Park committed to investing $100M over a two year time period in Upstart loans. They have also done deals with Kreditech, AvantCredit, Kabbage and several others in the space.
In addition to these deals Victory Park announced earlier this month that they will be launching a £200 million publicly traded trust on the London Stock Exchange. This trust will be investing in marketplace lenders around the globe and a good part of this Funding Circle deal will come through this entity.
In the next episode of the Lend Academy Podcast I will be talking with Brendan Carroll, a partner at Victory Park, where we will be discussing this Funding Circle deal and many others that they have closed in this space. So stay tuned.
Peter Renton is the chairman and co-founder of LendIt Fintech, the world’s first and largest digital media and events company focused on fintech. Peter has been writing about fintech since 2010 and he is the author and creator of the Fintech One-on-One Podcast, the first and longest-running fintech interview series. Peter has been interviewed by the Wall Street Journal, Bloomberg, The New York Times, CNBC, CNN, Fortune, NPR, Fox Business News, the Financial Times, and dozens of other publications.