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US asset manager Magnetar has partnered with marketplace lender Funding Circle to use the latter’s technology and distribution platform to deploy funding to the UK SMEs.
The three-year partnership will see the asset manager originate more than £300m to the UK SMEs.
Magnetar will also benefit from Funding Circle’s machine learning models to deliver financing in an efficient and cost-effective manner.
According to Funding Circle, borrowers can apply for loans via its platform in an average time of six minutes and have decisions in as little as nine seconds.
The group also estimates that expected investment returns for loans originated in the UK in 2021 stood between 5% and 6%.
Magnetar already has a presence in the UK alternative loan market, having partnered with the UK motor finance broker DSG Finance last year to provide up to £600 million of auto loans through new lender Unity Auto Finance.
In 2018, Magnetar, alongside Nomura, invested £150 million in alternative property lender LendInvest.
Post-pandemic recovery presents opportunities lenders
Magnetar’s collaboration with Funding Circle comes amid the UK’s ongoing recovery from the global pandemic that adversely impacted businesses’ growth and operations.
According to SME Finance Survey published in March 2022 by British Business Bank, four in ten SMEs are expected to grow over the next 12 months, with a 44percent of respondents anticipating the need for financing over the same period.
“At a vital moment in the UK’s economic recovery, it is [Magnetar’s] commitment will see thousands of small businesses access the finance they need to invest, grow, and create jobs in their communities,” said Lisa Jacobs, CEO of Funding Circle.
The increasing adoption of technology has given SMEs quicker and more lenient alternative to robust traditional banks.
As private lending gains traction in Europe and the UK and capital flows increase, asset managers have been increasingly teaming up with technology platform to gain scale and data processing capabilities to enhance deal sourcing.
Only last month, US asset manager Waterfall signed a two-year £1bn lending partnership with Funding Circle.
As investor interest in the space increases, however, Funding Circle is one of several investment platforms to move away from retail capital.
Funding Circle’s two latest team-ups come at the heels of the fintech’s closure of its lending platform for retail investors in March, in a move similar to its peer Zopa, which exited peer-to-peer lending in December 2021.
Also in December, competitor LendingWorks announced that it would exit P2P, shifting towards a business model reliant on institutional capital.
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