Funding Circle Shares Rise After Castlelake Unveils Funding Commitment

Funding Circle Holdings (LON: FCH) shares have risen on Tuesday after the SME lending platform announced a new institutional funding agreement with Castlelake, a global alternative investment manager. The stock was up around 3.7%, trading near 241.5p, having opened at 240p and touched an intraday high of 244p, against a previous close of 233p.

Under the deal announced this morning, Castlelake will provide up to £500m of committed funding to UK small businesses over a two-year period, marking the firm’s debut as an investor on the Funding Circle platform.

The agreement further diversifies Funding Circle’s institutional funding base, which already spans banks, asset managers, pension funds, insurers and government-backed entities.

Funding Circle said the deal reflects the strength of its proprietary credit models, built on more than 15 years of investment in technology and data, which it says discriminate risk three times better than traditional credit bureau scores. The company’s capital-light model relies on third-party institutional investors funding loans to small businesses, allowing it to scale without taking on balance sheet risk itself.

Dipesh Mehta, Chief Capital Officer at Funding Circle, said the new relationship “reflects the performance of our technology, data and credit expertise,” adding that it would allow the platform “to say yes to even more small businesses” and support economic growth across the UK.

Aadit Prasad, Managing Director and European Head of SME & Leasing at Castlelake, said the firm saw an opportunity to support UK small businesses while delivering “attractive risk-adjusted exposure” to its own investors.

The announcement underscores continued institutional appetite for UK SME lending as an asset class, even amid a mixed macroeconomic backdrop, and adds another well-capitalised name to Funding Circle’s growing roster of funding partners.