Kroll Bond Rating Agency (KBRA) assigns preliminary ratings to three classes of notes issues by Small Business Lending Trust 2020-A ("SBIZ 2020-A").
This transaction represents the second ABS securitization collateralized by loans made to small and medium-sized enterprises ("SMEs") incorporated in the United States and originated via the online lending platform operated by FC Marketplace, LLC, a wholly owned subsidiary of Funding Circle Holdings plc ("Funding Circle" or the "Company").
Founded in 2010, Funding Circle operates an online lending platform (www.fundingcircle.com) (the "Platform") to originate loans in the UK, US, Germany, and the Netherlands. Funding Circle completed an initial public offering on the London Stock Exchange in September 2018, raising £300 million in corporate capital. Since its founding, the Funding Circle Platform has facilitated over $10.9 billion in loans to over 77,000 SMEs globally.
Funding Circle maintains state lending licenses where required and does not use a partner bank for origination. The loans in Small Business Lending Trust 2020-A were all underwritten under Funding Circle’s credit guidelines and originated through the Platform to borrowers in the US. The original balances range from $25,000 to $500,000 with original terms ranging from 6 to 60 months. Origination fees are charged to the borrower based on the borrower’s risk profile and loan term. The origination fee is deducted from the total loan proceeds prior to disbursement. The average years in business of borrowers receiving loans is approximately eleven years, with a minimum of two years.
The transaction has initial credit enhancement levels of 33.25% for the Class A Notes, 25.50% for the Class B Notes, and 10.50% for the Class C Notes. Credit enhancement consists of overcollateralization, subordination, a cash reserve account, and excess spread.
KBRA analyzed the transaction using the Global General Rating Methodology for Asset-Backed Securities and the Global Structured Finance Counterparty Methodology. KBRA also conducted an on-site operational review of Funding Circle at the Company’s San Francisco offices in January 2019. KBRA will review the final transaction documents, legal structure, operative agreements, and legal opinions prior to assigning final ratings.
The preliminary ratings are based on information known to KBRA at the time of this publication. Information received subsequent to this release could result in the assignment of final ratings that differ from the preliminary ratings.
Preliminary Ratings Assigned: Small Business Lending Trust 2020-A
Initial Class Principal
To access ratings, reports and disclosures, click here.
Related Publications: (available at www.kbra.com)
- Small Business Lending Trust 2020-A Pre-Sale Report
- Global General Rating Methodology for Asset-Backed Securities
- Global Structured Finance Counterparty Methodology
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KBRA is a full-service credit rating agency registered with the U.S. Securities and Exchange Commission as an NRSRO. In addition, KBRA is designated as a designated rating organization by the Ontario Securities Commission for issuers of asset-backed securities to file a short form prospectus or shelf prospectus. KBRA is also recognized by the National Association of Insurance Commissioners as a Credit Rating Provider, and is a certified Credit Rating Agency (CRA) by the European Securities and Markets Authority (ESMA). Kroll Bond Rating Agency Europe Limited is registered with ESMA as a CRA.
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