Funding Circle Holdings PLC (lon:fch)
Funding Circle – Looking At Reviews

Funding Circle Holdings PLC Financials

ItemCurrent PeriodPrevious Period
Period6 Months6 Months
Adjusted Earnings
Adjusted EBITDA(£19m)(£14m)
Statutory Profit(£31m)(£27m)
Adjusted Profit
Total Debt
Net Debt

Commentary History
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Funding Circle Holdings PLC Share Price
Grade:The Orange Grade - Shares That I Think Show Promise With A Few Caveats.
Title: Funding Circle – Looking At Reviews
Company: FCH - Funding Circle Holdings PLC
Share Price Then: 112p
Author: Ian Smith
Date: Wed 21 Aug 2019
Comments: I still see promise in Funding Circle but I am concerned that at the end of the day they are a newish business lending money and continuing to expand the amount that they have to lend with suggestions that they do not have bad debt under control.

Although newish the business is established so the continuing big loses worry me as does the difficulty in understanding what the true quality of the loan book is.

There are a lot of caveats to this but I went to Trustpilot to look for negative comments and to try and see if there is more information. There seem to be two basic complaints

  1. Once you have made loans you can’t get your money back

  2. More recently bad debt plus fees is getting close to interest received

One very frequent complaint is that some investors want to be able to sell their part of a loan and apparently this used to be possible very quickly but now is taking up to three months.

If you lend money on this platform it is currently taking at least 88 days to get your money out by queuing up to sell to other lenders.

The worst part is that it will not sell all loan parts as some are defaulted. I am trying to understand the thinking here given that the lender has put his money in a lending platform and expects to be able to sell bad debt.

At first glance I had sympathy with the FC rep who was the source of I contacted customer service who are pretty blunt and rude - telling me I shouldn't be using it like a bank current account as it does appear that there are retail investors who are not looking to make loans for the full term of the loan and haven’t understood the risks involved in getting out of the loan that they made.

Then I looked at the web site and it is pretty clear that the site is telling retail investors that they can do this and it is one of the two options for getting their money out, the other option is to turn off automatic reinvestment and your interest payments can be withdrawn as they are received.

So this inability to fulfil a withdrawal method which I would take from the web site to be a fairly simple process may be a worrying sign, after all who wouldn’t want to buy a loan with a good repayment history?

Even more worrying is the number of comments similar to …Over the past months the rates of return earned have dropped sharply as the rate of defaults have increased. In July (just ending) my defaults exceed interest earned..

I did well in this company for a few years then they changed the way they did there all went down hill from there

One thing that is clear to me is that posters feel that the business is moving away from P2P lending either intentionally as they get more corporate backing or because they have lost touch with want the P2P community wants.

Now I have no problem with the idea that company may lose most of its P2P lenders and replaces their funds with funds from mainstream investors. So although I believe the negative posts about an illiquid secondary market and that it might be a platform no longer suited to many retail investors I do not take that to mean that the platform itself is in trouble.

I am troubled by the bad debt comments as the company is already losing a lot of money, basically it needs to cancel all of its marketing spend to show break even over the last couple of years.

So how does it get to profit? By making more loans at a lower cost seems to be the answer.

As it is not company money being lent loses may not matter to the Funding Circles accounts but it will matter to the source of these funds.

As the company has expanded it seems to have ended up as being just another money lender with a very high cost of customer acquisition model.
Read Count: 186/10080

Buy/No Buy In A Nutshell
NegativesWell established business that seems to be prioritising growth over profitability, they seem to have more money to lend than customers who can borrow and pay it back.
PositivesAs a government backed COVID loans provider these might be a good loan book, but these loans have no repayments due for the first 12 months.
Initial Review Price68p
Last Review Price76.8p
Last Review Date02-Sep-2020
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