Funding Circle secures up to £500m commitment from Castlelake

Funding Circle has agreed a new funding partnership with global alternative investment manager Castlelake that could provide up to £500 million of funding to UK small businesses over the next two years.

The agreement brings Castlelake onto the Funding Circle platform as a new institutional investor and further diversifies the SME finance provider’s funding base.

Under the agreement, Castlelake will provide up to £500 million of committed funding for lending to small businesses across the UK through Funding Circle’s platform.

Funding Circle uses proprietary credit models and technology developed over more than 15 years to assess SME borrowers and connect businesses seeking finance with institutional capital.

According to Funding Circle, its credit models discriminate risk three times more effectively than traditional bureau scores. The platform enables institutional investors to deploy capital across a large number of UK SMEs, providing exposure to an asset class that can otherwise be difficult to access at scale.

The latest agreement adds Castlelake to Funding Circle’s existing pool of institutional funding partners, which includes banks, asset managers, pension funds, insurance companies and government-backed organisations.

The diversified institutional funding base forms an important part of Funding Circle’s capital-light model, with external investors providing the capital used to fund lending to SMEs through its platform.

“Continuing to attract new institutional capital reflects the performance of our technology, data and credit expertise, and the attractive returns our platform has been able to deliver.

“This agreement further expands our deep and diverse funding base and means we can say yes to even more small businesses, putting vital funding to work to support the real economy and drive economic growth across the UK.”

Castlelake specialises in asset-based private markets investments and the agreement provides the investment manager with further exposure to the UK SME lending market.

Aadit Prasad, Managing Director, European Head of SME & Leasing at Castlelake, said: “We are pleased to begin a new relationship with Funding Circle.

“We believe its platform, technology and data capabilities provide an efficient means of deploying capital into the UK SME sector, an area we see as an opportunity to both support small businesses across the country and provide our investors with attractive risk-adjusted exposure.”