Funding Circle
UK online lender matching small business loans with institutional capital.
On the record
Checkpoint: Half Year 2026 results, testing if H1 revenue momentum holds into a weaker second half
The call
Funding Circle keeps growing profitably on proprietary data and locked-in funding lines, while cheaper-funded neobanks slowly close the gap.
Funding Circle lends money to small UK businesses and has been profitable for years. It has real advantages: 15 years of data on how businesses repay loans, a government license that keeps out amateurs, and long-term commitments from big investment firms to fund its loans. The hard part to copy is that combination of data, regulation, and trusted relationships. However, newer banks like Starling and Revolut can borrow money cheaper because customers give them deposits, while Funding Circle has to pay more to get funding from institutions. That cost difference could slowly squeeze Funding Circle's profits or force it to shrink over the next few years if these cheaper rivals grab market share or if the UK economy slows and small businesses stop borrowing.
Why
01
AI pressure: AI-native SME lender (no FCA-licensed rival shipped yet). AI underwriting tools could let neobanks price SME loans faster, but replicating 15 years of repayment data takes time. Could AI do the core job? Unlikely.
02
Bigger players: Starling Bank, Revolut Business. Deposit-funded neobanks borrow cheaper than Funding Circle and could undercut its loan pricing as they scale SME lending. Could a giant copy it? No, they are blocked.
03
What protects it. Fifteen-plus years of UK SME repayment data, an FCA license, and locked-in institutional funding lines like the £700m Waterfall/Citi deal.
What would change this call
Revenue growth falls below 15% while Starling, Revolut Business, or iwoca report growth above 30%. Would show neobanks and rivals are actually pulling SME customers away, not just competing on price.
Funding Circle misses or restates H2 2026 guidance after 8 September 2026 half-year results. Would signal UK credit cycle or macro headwinds are hitting originations or margins.
Waterfall (£700m), Citi (£400m), or FlexiPay (£320m) funding facilities fail to renew on similar terms. Would show institutional funders are pricing in higher risk, narrowing its capital-cost advantage.
Funding Circle misses or restates H2 2026 guidance after 8 September 2026 half-year results. Would signal UK credit cycle or macro headwinds are hitting originations or margins.
Waterfall (£700m), Citi (£400m), or FlexiPay (£320m) funding facilities fail to renew on similar terms. Would show institutional funders are pricing in higher risk, narrowing its capital-cost advantage.
Key numbers
- H1 2026 revenue £138m, up 50% YoY
- FY2025 revenue £204.3m, PBT £20.3m
- £700m Waterfall/Citi funding deal
Named risks
- Funding-cost disadvantage vs deposit-funded neobanks compressing margins or growth.
- UK credit cycle turning, causing material credit-loss surprise in FY26-FY27.
- Dependency on government SME loan scheme payouts carrying political/regulatory risk.
- Renewal risk on time-bound forward-flow and securitisation funding facilities.
- Macro slowdown flagged for H2 2026 affecting originations and demand.
Rivals, as read in July 2026
| Rival | Direction | Evidence |
|---|---|---|
| Starling Bank | gaining on | Deposit funding gives structural cost advantage; watch item flagged in FC's own risk framing, 2026 |
| Revolut Business | gaining on | Neobank credit expansion cited as structural funding-cost threat to specialist lenders, 2026 |
| iwoca | contesting | Close UK non-bank SME lending peer competing for originations, 2026 |
| YouLend | contesting | Embedded finance rival contesting UK SME lending space, 2026 |
| High street banks (Barclays, Lloyds, NatWest, HSBC) | gaining on | Challenger/specialist lenders reached 60% of gross SME bank lending in 2025 vs 39% in 2012, per FC citing British Business Bank |
Questions people ask
- Is Funding Circle profitable in 2026?
- Yes. Funding Circle posted FY2025 profit before tax of £20.3m on £204.3m revenue (reported 2026-03-05), and its H1 2026 trading update (2026-07-16) showed PBT of about £23m on £138m revenue, with FY2026 guidance raised to £35m+ PBT.
- Who owns Funding Circle?
- Funding Circle Holdings plc is a publicly traded company on the London Stock Exchange (LSE: FCH), FTSE 250 constituent. As of 2026-07-08 top shareholders were Schroder Investment Management (~8.85%), Capital Research & Management (~4.93%), and BlackRock Investment Management UK (~4.02%).
- Could AI replace Funding Circle's lending business?
- Not easily. Funding Circle's underwriting relies on 15+ years of proprietary UK SME repayment data, an FCA license, and institutional funding lines such as the £700m Waterfall/Citi forward-flow deal (2026-02-12), assets a generic AI model cannot replicate without years of regulated lending history.
- Who is Funding Circle's biggest competitor?
- Deposit-funded neobanks Starling Bank and Revolut Business pose a structural funding-cost threat since they can lend more cheaply, while specialist peers iwoca and YouLend compete directly in UK SME lending; Funding Circle's H1 2026 revenue still grew 50% YoY (reported 2026-07-16).
- Did Funding Circle lay off staff?
- Yes. Headcount fell to 726 by December 2024 from 1,101 in December 2023, driven by cost actions and the sale of its US business, per the Full Year 2024 Results published 2026-02-18. Headcount then stabilized at 778 by December 2025.
- Is Funding Circle still a peer-to-peer lending platform?
- No. Funding Circle permanently exited peer-to-peer lending on 10 March 2022, shifting entirely to institutional and forward-flow funding partnerships to originate UK SME loans, including a £700m Waterfall Asset Management/Citi deal announced 2026-02-12.
Timeline
- 2026-07-16H1 2026 trading update: revenue c.£138m up 50% YoY, PBT c.£23m, AuM £3.3bn
- 2026-06-13Tenth public securitisation, surpassing £2.5bn cumulative issuance
- 2026-04-14FlexiPay funding facility upsized from £240m to £320m
- 2026-03-05FY2025 results: revenue £204.3m up 28%, PBT £20.3m, FY2026 guidance raised to £235m revenue
- 2026-02-18FY2024 results: revenue £160.1m up 23%, headcount cut to 726 from 1,101
- 2026-02-12£700m forward-flow funding commitment with Waterfall Asset Management and Citi
- 2024-09Cashback Business Credit Card launched in beta, 2% then 1% cashback, up to £250,000 credit
- 2024-06-26Sold US business to iBusiness Funding for c.£33m, surrendered US SBLC license
- 2022-03-10Permanently exited peer-to-peer lending model
- 2010-01Founded by Samir Desai, James Meekings, Andrew Mullinger, Alex Tonelli and Samuel Hodges
Revision history
22 July 2026
First assessed. Defensible for now. The text above is fixed as of this date and is not edited afterwards.
In the same band
Sources
- Full Year 2025 Results (2026-03-05)
- Half Year 2026 Trading Update (2026-07-16)
- Funding Circle Holdings plc (LSE: FCH) (2026-07-16)
- Funding Circle renews funding agreement to support FlexiPay growth (2026-04-14)
- Funding Circle strengthens partnership with Waterfall Asset Management (2026-02-12)
- Full Year 2024 Results (2026-02-18)
- Funding Circle Holdings (LON) (2026-06-28)
- Funding Circle (2026-07-16)
- Funding Circle sells its US unit, returns SBLC license (2024-06-26)
- gurufocus.com
- Funding Circle Full Year 2025 Results (2026-03-05)
- Funding Circle Holdings PLC, FCH:LSE profile (2026-07-08)