A Filipino financial technology startup, First Circle, has raised P1.4 billion ($26 million) to improve its financial offerings to small and medium enterprises (SMEs) in the country. The company plans to expand to more locations in the Philippines and to increase its capital base to more than P5 billion ($100 million).
The Series A round was led by Venturra Capital, alongside Insignia Ventures Partners, Hong Kong’s Silverhorn Investment Advisors and Tryb Group. Before the round, First Circle has already raised P135 million ($2.5 million).
First Circle is a financial technology lender that specializes in short-term business loans for SMEs that are in need of funding to address temporary capital gaps. These short-term loans are repaid in a year or less.
Unlike other lending firms, First Circle doesn’t require collateral. Applications can be done online and the processing and verification process usually takes less than 48 hours.
The fintech startup was founded in 2016 by CEO Patrick Lynch, who previously worked for CompareAsia Group, and CTO Tony Ennis. “Building CompareAsia Group across Southeast Asian countries, I saw that SMEs were deeply underserved and realized that by putting access to financial services in their pocket, we would be able to open up a huge market and could build a huge business,” Lynch said.
Unlike other fintech lending companies where the loans come mostly from third-party lenders, First Circle assumes half of its loan book, with the remainder taken up by its numerous lending partners. This way, the company takes some responsibility for defaulting loans. Revenue from interest is split between the company and the lender.
“We share the risk and reward with our funding partners, which aligns interests for the long term. This is sustainable. Personally, I see economic winter on the horizon, and I believe that misalignment between P2P (peer-to-peer) platforms and their lenders will cause many such platforms to fail in the coming years,” Lynch explained.
After lending more than P4 billion ($75 million) in loans since the beginning of the year, First Circle has built up a large database of suppliers and business partners, allowing it to process loan applications faster.
First Circle is looking to expand to other countries in Southeast Asia. For the meantime, the company plans to focus on the Philippine market, where a large number of small business owners borrow from friends and relatives. First Circle aims to make a difference by making business loans accessible to underserved entrepreneurs.