iBusiness Funding, LLC, a division of Ready Capital Corporation, Enters Definitive Agreement to Acquire Funding Circle USA (FC USA), Inc. and Return Funding Circle's Newly Acquired SBLC License to the SBA

Rhea-AI Summary

iBusiness Funding, a division of Ready Capital (NYSE: RC), has entered a definitive agreement to acquire Funding Circle USA (FC USA) and its subsidiaries. The transaction is contingent upon FC USA returning its Small Business Lending Company (SBLC) license to the SBA. The acquisition aligns both companies' missions of supporting underserved borrowers. iBusiness CEO Justin Levy highlighted FC USA's compliance program and low default rates as significant assets. The combined entity will leverage FC USA's tech-enabled customer experience and iBusiness' Lending as a Service (LaaS) and LenderAI products. Ready Capital expects the merger to enhance revenue and earnings.

Positive

• Acquisition of FC USA expected to boost revenue and earnings for Ready Capital.
• FC USA's industry-leading low default rates are a strategic advantage.
• Combination of FC USA's tech-enabled customer experience and iBusiness' LaaS and LenderAI offerings.
• FC USA's strong compliance program aligns with iBusiness' focus on regulatory adherence.

Negative

• None.

Financial Analyst

The acquisition of Funding Circle USA (FC USA) by iBusiness Funding, a division of Ready Capital Corporation, signals a significant strategic move in the small business lending sector. The transaction is likely to have considerable implications for Ready Capital’s financials and its position in the market.

Firstly, the addition of FC USA will likely boost Ready Capital’s revenue and earnings, as stated by the CEO, Thomas Capasse. Integrating FC USA’s established client base and its industry-leading low default rates could enhance Ready Capital’s profitability, especially considering the company's goal to support underserved borrowers which aligns well with FC USA's mission to be the largest SBA lender for loans under $500,000.

Secondly, it's important to note that FC USA's compliance strength is a major asset. A robust compliance program reduces the risk of regulatory issues and defaults, which is important for financial stability. Investors should also consider the potential operational efficiencies gained from integrating FC USA's automated, tech-enabled customer experience with iBusiness Funding’s existing services like LaaS and LenderAI.

However, a detailed due diligence process remains vital to identify any potential risks or integration challenges that could impact short-term financials. Long-term, the synergies from this merger could solidify Ready Capital's market leadership in tech-enabled small business lending.

Market Research Analyst

This acquisition positions Ready Capital Corporation to capitalize on the evolving landscape of small business lending. The combined entity’s emphasis on leveraging technology to enhance customer experience is a critical factor. In an industry where speed and efficiency are paramount, FC USA’s automated solutions could set new standards for client interaction and loan processing times.

The strategic alignment between FC USA’s existing partnerships and iBusiness Funding’s technological prowess creates opportunities for market expansion. By integrating these capabilities, the company can offer a more comprehensive suite of services that cater to a broader range of small business needs, potentially attracting new clients and expanding market share.

Furthermore, the acquisition aligns with the broader trend of digitization in financial services, where agility and compliance are key competitive advantages. FC USA’s low default rates even during the COVID-19 pandemic underscore the resilience and reliability of its lending model, which is appealing to both borrowers and investors.

In the long run, the acquisition could enhance Ready Capital's competitive position and open up new revenue streams, especially in underserved market segments.

FORT LAUDERDALE, Fla., June 24, 2024 /PRNewswire/ -- iBusiness Funding LLC (iBusiness), the technology and lending services division of Ready Capital Corporation (NYSE: RC), and Funding Circle Holdings plc are pleased to announce a share purchase agreement, positioning iBusiness Funding, LLC as the new owner of FC USA and its subsidiaries, contingent on the return of its Small Business Lending Company (SBLC) license to the SBA.

Founder and CEO of iBusiness Funding LLC Justin Levy expressed his enthusiasm, saying, "We are thrilled to welcome the exceptional FC USA team to the iBusiness family. FC USA's mission to be the largest SBA lender for loans under $500,000 aligns with our goal to support underserved borrowers, the only difference is iBusiness achieves this goal through many SBA-approved lenders in our network." 

Funding Circle CEO Lisa Jacobs said, "We are pleased to have reached an agreement with iBusiness Funding, one of the leading processors of loans to US small businesses. In iBusiness, we have found a partner that shares in our mission, and we look forward to seeing the success of the combined entity." 

Ready Capital CEO Thomas Capasse said, "We're excited to acquire FC USA and expect the acquisition to yield meaningful revenue and earnings to the combined company in the years to come."

iBusiness Funding puts a heavy focus on compliance in small business lending, and is particularly impressed with FC USA's compliance program. iBusiness Funding was built with a foundation of compliance with SBA rules, as well as BSA, AML, and various other state, federal, and banking regulations.

The combined entity will bring together FC USA 's embedded partnerships and automated, tech enabled customer experience with iBusiness' Lending as a Service (LaaS) and LenderAI product offerings to deliver a best in class partner experience.

Levy further commented on the strategic direction stating:

"Throughout the due diligence process, we were continually impressed with FC USA's compliance program and their portfolio's industry-leading low default rates for over a decade, even in COVID-impacted vintages, which was especially noteworthy. FC USA has uniquely uncovered the ability to implement bank-level compliance at speed.

"After getting under the hood and seeing the processes and procedures FC USA has in place, it is no wonder that they were granted an SBLC license, as the robustness of their compliance programs is more in line with a large scale national bank as opposed to a FinTech – on top of their industry-leading low default rates and great customer experience.

"We are thrilled to offer these enhancements to our bank client network. Given that our vision is to revolutionize small business lending by supporting all banks and lenders looking to embrace technology and streamline processes, FC US's SBLC license is not essential to our business.

"Success to us is when a small business can quickly know with certainty whether they are going to be approved by their bank or lending institution, and if they aren't approved, having a roadmap to a future approval and lower cost of financing. When getting a business loan is as easy as getting a mortgage, then we know we've done our job."

About iBusiness Funding, LLC

iBusiness Funding is a leading provider of lending solutions for banks and lenders of all sizes with a specialization in SBA lending. The company is dedicated to streamlining the business lending process to allow lenders to efficiently deliver capital to small and medium-sized businesses. iBusiness Funding has processed over $7 billion in SBA loans to date, and the team processes over 1,000 business loan applications through its platform daily.

About Ready Capital Corporation 

Ready Capital Corporation (NYSE: RC) is a multi-strategy real estate finance company that originates, acquires, finances and services lower-to-middle-market investor and owner occupied commercial real estate loans. The Company specializes in loans backed by commercial real estate, including agency multifamily, investor, construction, and bridge as well as U.S. Small Business Administration loans under its Section 7(a) program. Headquartered in New York, New York, the Company employs approximately 350 professionals nationwide.

About Funding Circle

Funding Circle (LSE: FCH) is a lending platform for small business borrowers. Established in the UK in 2010, and now the leading lending platform to SMEs, the Group also has a material and growing presence in the US. Globally, Funding Circle has provided £15bn in loans to c.135,000 businesses. For small business borrowers, Funding Circle provides a leading-edge customer experience, delivered through its technology, machine learning, and data science, coupled with a human touch. Its solutions continue to help customers access the funding they need to succeed. For lending investors, Funding Circle provides access to an alternative asset class in an underserved market and delivers robust and attractive returns.

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SOURCE iBusiness Funding

FAQ

What is the significance of iBusiness Funding acquiring Funding Circle USA?

The acquisition is expected to enhance Ready Capital's revenue and earnings while leveraging FC USA's strong compliance and low default rates.

What is the condition for iBusiness Funding's acquisition of Funding Circle USA?

The transaction is contingent upon FC USA returning its Small Business Lending Company (SBLC) license to the SBA.

How will the acquisition of Funding Circle USA impact Ready Capital (NYSE: RC)?

The acquisition is anticipated to bolster Ready Capital's financial performance through increased revenue and earnings.

What advantages does Funding Circle USA bring to iBusiness Funding?

FC USA brings a robust compliance program, industry-leading low default rates, and a tech-enabled customer experience.

Why was the SBLC license of Funding Circle USA returned as part of the acquisition?

The SBLC license was returned because it is not essential to iBusiness Funding's operations, which focus on supporting banks and lenders through technology-driven processes.