Funding Circle Holdings (LSE:FCH), the UK's leading SME finance platform, agreed a new funding arrangement with Castlelake, a global alternative investment manager, that will provide up to £500m of committed funding to UK small businesses over two years.
The deal brings Castlelake on as a new investor on Funding Circle's platform, which allows institutional funders to deploy capital into UK small business lending at scale.
Funding Circle's existing pool of institutional funders already spans banks, asset managers, pension funds, insurance companies and government-backed entities, and the company said the addition of Castlelake further diversifies that base.
The platform relies on proprietary credit models built over more than 15 years, which the company said discriminate risk three times better than traditional bureau scores.
"Continuing to attract new institutional capital reflects the performance of our technology, data and credit expertise, and the attractive returns our platform has been able to deliver," said Dipesh Mehta, Chief Capital Officer at Funding Circle.
Aadit Prasad, Managing Director and European Head of SME & Leasing at Castlelake, said the firm sees UK SME lending as "an opportunity to both support small businesses across the country and provide our investors with attractive risk-adjusted exposure."
The broader institutional funding base underpins Funding Circle's capital-light model, which the company says supports efficient scaling of lending to small businesses across the UK.
News Intelligence what this means for the company
Funding Circle has secured up to £500m in committed capital from Castlelake over two years for UK SME lending, expanding its institutional funder base. This follows a £400m facility from Citi agreed in April 2026 for FlexiPay and card products, and comes after stronger-than-year-ago first-half results that included outsized PBT improvement and increased Term Loans cash generation, signalling that the platform's credit models and capital-light model continue to attract institutional capital at scale.
The deal reinforces Funding Circle's ability to fund growth without balance-sheet strain, diversifying its institutional funder base and validating its proprietary credit technology. However, the announcement contains no detail on pricing, deployment pace, or impact on near-term profitability, leaving execution risk unresolved.
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