A platform that once let ordinary people lend £20 at a time to small businesses now runs on institutional cheques from the likes of Barclays and Deutsche Bank. So how does Funding Circle make money today? Mostly through transaction and servicing fees on the SME loans it originates for institutional investors, plus interest and fee income from newer products like FlexiPay.
That single answer sits on top of a much longer story one that started with three Oxford friends, £60,000 of their own savings, and a bet that ordinary savers could fund small businesses better than the banks were doing in the aftermath of the 2008 financial crisis.
Where It Started: The Peer-to-Peer Lending Years
The original Funding Circle business model was straightforward: borrowers paid an origination fee to access a loan, and lenders paid an annual servicing fee on whatever they had out. In the early days, that meant something close to a 1% cut for lenders and a 2% cut for borrowers thin margins, but enough to prove that a lending marketplace could work without a bank sitting in the middle.
For years, loan pricing worked almost like an auction, with individual lenders bidding against each other to fund each loan. That changed in 2015, when the platform began setting its own rates by risk band — a quiet shift from matchmaker to underwriter that hinted at where the business was eventually heading. By the time it prepared to float on the stock market in 2018, the platform had funded well over £5 billion in loans to tens of thousands of UK small businesses.
Why the Peer-to-Peer Model Was Wound Down
Retail P2P lending on the platform was permanently closed in March 2022, after new retail investment had already been paused since the early days of the pandemic. By that point, retail money made up only a small sliver of the loan book. The decision followed a wider retreat across the sector other well-known peer-to-peer names had either shut down or pivoted into different licensed models around the same time.
What's notable is the timing: the platform closed its founding product just as the wider business turned genuinely profitable for the first time. That wasn't really retreat it looked more like a company recognising that retail P2P had quietly become the more expensive way to fund the same loans, once institutional capital was readily available at scale.
The Shift to Institutional, Forward-Flow Funding
Today's core lending business runs on forward-flow agreements — arrangements where institutional investors commit large sums in advance, agreeing to buy loans as they're originated, rather than waiting for individual lenders to fund each one piecemeal. Newer products, including FlexiPay and a business credit card, are partly funded from the company's own balance sheet instead.
The scale of this shift is hard to overstate. Facilities with names like Barclays, Deutsche Bank, TPG Angelo Gordon and Waterfall Asset Management now represent hundreds of millions of pounds in committed capital apiece — a world away from a lender putting up £20 against a stranger's business plan.
Life as a Public Company
Funding Circle listed on the London Stock Exchange in September 2018, raising around £300 million at a valuation near £1.5 billion. Going public exposed the business to quarterly scrutiny at a point when it was still deep in investment mode early results showed healthy revenue growth alongside real losses, and it took several years of restructuring before the UK business turned reliably profitable.
By 2025, that patience had paid off: group revenue grew by more than a quarter year-on-year, and profit after tax rose several times over compared with the year before. That's the part of the Funding Circle IPO story that took the longest to play out public markets buying growth first, and profit catching up years later.
Beyond Lending: FlexiPay and Product Expansion
FlexiPay is probably the clearest sign of how the business has diversified beyond pure lending. Launched in 2021 as a flexible credit line with a flat fee and interest-free short-term repayment, it has grown into a genuinely large product line in its own right transaction volumes have climbed year after year, moving well past the point of being a side experiment. A cashback business credit card followed in 2024, pushing the company further from "single-product lender" toward a broader small-business finance platform.
The Model, Then and Now
The contrast with 2010 is stark. Back then, funding came from a mix of retail and institutional investors, pricing was auction-driven, and the product range began and ended with term loans. Today, institutional capital dominates the core lending business, Funding Circle sets its own pricing and underwriting standards, and the product line stretches across loans, FlexiPay and card products.
The underlying mission getting capital to small businesses that banks have historically been slow to serve hasn't really changed. What's changed is who's willing to put up the money to do it, and at what scale.
The Bottom Line
The honest answer to how Funding Circle makes money today isn't really "loans" on its own it's closer to "institutional trust," priced in facilities worth hundreds of millions, from lenders who don't need £20 bids to believe in a small business's prospects. Whether that trade-off was the right one for the retail investors who funded the platform's early years is a fair question. For the business itself, the direction of travel has been clear for a while.
Financial figures referenced here are drawn from Funding Circle's own results announcements and contemporaneous financial reporting. For a fuller, source-cited breakdown of the numbers, Entrepreneur Plus UK has covered this in more depth — and you can find EP+ on Trustpilot if you'd like to leave feedback on our coverage.
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