Funding Circle has announced that it is permanently closing its retail platform to new investors.

The news came as the company revealed pre-tax profits of £64.1 million in 2021, up from a loss of £108.1 million in 2020 in a strong set of full-year results.

Funding Circle had been one of the market leaders in the pre-pandemic boom in peer-to-peer lending.

The company’s retail platform, which matched retail investors to startups and small to medium sized businesses in search of capital, had been closed since the start of the pandemic in March 2020.

The company suspended the retail investment platform due to restrictions around the government’s taxpayer-backed loan schemes for businesses.

However, pandemic-related disruption, combined with waning investor appetite for peer-to-peer lending, has led to a decline in the peer-to-peer lending market.

Funding Circle said that retail lending currently represents around 5 per cent of its total loans under management.

In a statement issued alongside its annual results yesterday, Funding Circle said: “Today we have confirmed to customers that we are permanently closing the retail platform to new investments.

“Retail investors in the UK will continue to receive repayments of interest and principal every month and can withdraw these funds at any time. Since launch in 2010, retail investors have earned average net returns (after fees and bad debts) of around 5 per cent annually lending to businesses on the platform.”

Fellow SME lenders including have also moved away from the peer-to-peer lending model due to increased regulatory pressure after investors in other peer-to-peer lending schemes reported losing large sums of money, which has increased compliance risk and costs for firms.

Zopa, which pioneered the peer-to-peer model has since been awarded a banking licence and operates as a bank, while Funding Circle has doubled down on facilitating business loans from institutions and public and private funds.

The firm’s annual results show loan originations were down 16 percent to £2.3 billion in 2021, but its financial position was improved by better than expected loan performance, which resulted in a fair value gain of £28.6 million.

In forward guidance for 2025, the company said it expects total UK income of at least £220m, alongside US total income of £70m. By 2025 the company expects all segments of the group to be profitable.

It also said it sees "significant growth opportunities" for its FlexiPay services including the FlexiPay Card.

Lisa Jacobs, CEO of Funding Circle, said that 2021 had been a successful year.

“We continued to deliver a superior customer experience through our world-class technology, with over 70 per cent of UK applications now receiving an instant decision,” she said.

“SMEs are increasingly using digital channels to manage all aspects of their business and this trend is here to stay.Our focus for the last two years has been on profitable growth and today’s results highlight the excellent progress we have made.”

She added: “We are in a strong position as a business and as we look ahead to the rest of 2022 and beyond, there is a bright future ahead of us. A decade of R&D is now coming to fruition as we begin to empower small businesses to not only borrow, but pay and spend as well”.

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