Funding Circle made more profit in six months than it made in the whole of last year. Pre-tax profit for the first half of 2026 was about £23 million, against £20 million for the entirety of 2025 and £6 million in the same half a year ago.
Revenue grew 50 per cent to roughly £138 million, from £92 million. The company extended £1.7 billion of credit over the half, up from £1.1 billion, and assets under management rose to £3.3 billion.
What the Business Actually Does
Funding Circle lends to small and medium-sized businesses, and it does so through two distinct lines that the half-year trading update reports separately.
Term Loans is the traditional side: fixed-term business lending, which originated £1,050 million in the half and holds £3.0 billion of the group’s assets under management. FlexiPay and Card is the newer, shorter-duration side, covering flexible credit and business card transactions, which grew to £640 million of transactions.
The distinction matters when reading the growth. A term loan book grows by writing more loans and holding them. A card and flexible credit business grows by processing more transactions, which turns over continuously. Those are different revenue mechanics, and having both is what allows the company to grow revenue faster than its loan book.
The Uncomfortable Context
The obvious question is how a lender to small businesses posts numbers like these in a period when small businesses themselves are reporting the opposite.
Over a broadly comparable half, the Federation of Small Businesses recorded the weakest confidence reading in its index’s history, with 32 per cent of firms expecting to shrink, sell up or close and 55 per cent reporting falling revenues.
Both things are true, and the reconciliation is not comfortable. Demand for credit rises when trading is difficult. A business with falling revenue and rising costs needs working capital precisely because it is under pressure, and a lender meeting that demand will see volumes grow.
That is not a criticism of the company. Credit is what allows a viable business to trade through a bad period, and a lender willing to provide it when conditions are poor is performing a function the economy needs. But a 50 per cent revenue increase at an SME lender is not on its own evidence that small businesses are doing well. It is evidence that a lot of them needed money.
What the Company Says About Demand
The update is more candid on this than the headline figures suggest. It describes strong SME demand in the first quarter, carried through from late 2025, then “normalising in Q2 2026 as we approach the typically quieter summer period”.
That is a company telling investors that the exceptional demand it saw at the start of the year moderated in the second quarter. Read against a full-year guidance of at least £235 million revenue, having already booked £138 million, the implied second half is around £97 million, which would be materially below the first half.
Some of that is seasonality and some is conservatism in guidance. It is still worth noting that the company’s own numbers do not assume the first-half rate continues.
The Balance Sheet Position
The unrestricted cash balance increased to £136 million, which is a substantial buffer relative to the profit being generated.
For a lender that figure carries more weight than it would elsewhere. Lending businesses fail through funding and credit quality rather than through operating losses, and a strong unrestricted cash position is the first defence against both. A firm with £136 million of unrestricted cash has room to absorb a deterioration in its book without being forced to sell assets or restrict new lending at the moment its customers most need it.
Assets under management growing from £2.8 billion a year ago to £3.3 billion, while credit extended in the half rose from £1.1 billion to £1.7 billion, indicates the book is expanding rather than simply churning.
Why It Matters Beyond the Company
For business owners the relevant point is not the share price reaction. It is what these figures say about credit availability.
The picture across the recent data has been consistent. Lloyds reported a growing loan book and rising risk-weighted assets, which we covered when it posted £4.3 billion of half-year profit. Now a specialist SME lender reports £1.7 billion of credit extended in six months, up more than 50 per cent.
Two lenders of very different types are both expanding supply. Whatever else is difficult about the current environment, the availability of credit to businesses that can service it is not the binding constraint. Firms that assumed otherwise, and have been rationing their own growth on the expectation that finance would be hard to obtain, are working from a premise the market data does not support.
What has changed is the price rather than the availability, and that is a different planning problem.
What the Chief Executive Said
Lisa Jacobs, chief executive, framed the result around the customer base. “It’s been another standout six months for Funding Circle,” she said. “We’ve built upon last year’s momentum with strong revenue and profit growth, driven by our continued product development and market demand.”
She added: “Small businesses power the UK economy, driving innovation, creating jobs and fuelling regional growth.”
On the numbers reported, the company helped a record number of them access finance in a half year when a record proportion said they expected to contract. Those two records belong in the same sentence, because they describe the same economy.
What the Two Product Lines Say About the Market
The split between the two businesses is the most informative part of the update for anyone trying to read SME conditions from it.
Term Loans originated £1,050 million and carries £3.0 billion of assets under management. That is patient money: a business taking a term loan is funding something with a payback period, whether equipment, premises, stock for a season or an acquisition. Origination at that level says a meaningful number of firms are still making multi-year commitments.
FlexiPay and Card grew transactions to £640 million. That is the opposite end of the duration spectrum, covering flexible credit and card spending, and it is the line that moves with day-to-day cash management rather than with investment decisions.
A business reaching for flexible credit is usually smoothing a gap between money going out and money coming in. Growth there is not automatically distress, since a well-run firm uses short-term facilities deliberately, but it is the line that would move first if payment terms were stretching or if customers were paying later.
Both growing together is a healthier signal than either growing alone. Term lending growing while flexible credit shrank would suggest investment without liquidity pressure. Flexible credit growing while term lending shrank would suggest firms surviving rather than building. The reported combination points to a market where both are happening at once, across different companies, which is what a genuinely mixed economy looks like.
What to Watch
The figure to follow is credit quality rather than revenue. Lending volumes grow quickly in conditions like these; the cost of that growth appears later, in impairments, as some of the businesses that borrowed under pressure fail to trade through.
The full-year guidance of at least £235 million revenue and at least £35 million pre-tax profit is the second marker. Meeting it from here requires a second half that the company has already signalled will be quieter than the first.
This article reports on published company results and does not constitute investment advice.
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