Peer-to-peer lending was briefly a growth business based on the idea that people with money would be willing to lend to individuals and small businesses (though they did not know them) enabled by a website platform provided by the host.
Zopa, Ratesetter and Funding Circle are still there, as are a few valiant others.
But the vast majority of new entrants have shut up shop or are just about holding on because they cannot make it pay.
Partly this is because not that many individuals want to play.
Zopa was stuck at about 70,000 participating individuals for years and this does make it difficult to raise large sums. Steps have been taken to enable ISA money to be invested, but have been slow.
It remains the case that people may lend a few thousand pounds, but it is quite a different matter if someone wants a few million. Perhaps that is why Zopa recently became a bank as well.
Be that as it may, Funding Circle is one of the best, focusing on small businesses and mobilising larger pools of capital.
It has grown in the UK, Germany, the Netherlands and the United States, funded in part by private placements — investors who get in on the ground floor and hope the business will flourish and go public — and it continues to grow. In particular there is a band of SMEs, over 30%, who keep going back to the well and these are a ready conduit for more loans. That is what the business is about.
Funding Circle says it has facilitated £5 billion in loans, to over 50,000 SMEs, from 80,000 investors, though that is from when it started.
It has good technology to make the SME businesses stay honest. It has revenues of £94.5 million as against £50.9 million the previous year and loans grew from £721 million in 2015 to £1.7 billion two years later.
But the trouble is it does not make any money, and though this does not seem to matter in America, it still does over here.
In 2016 it lost £46.6 million, in 2017 £35.3 million and in the six months of 2018 it lost £27 million. The accumulated losses are £180 million as against £70 million in 2015.
Samir Desai, the chief executive, hopes the IPO will shore up the balance sheet and allow him to keep growing.
I hope so too, but I am not sure I would want to put money in it.
