If you’re thinking of taking out a business loan through Funding Circle, cast your eyes over this first to make sure you have all of the information you need. These details are available on our website but we thought you might find this guide useful.
Who can apply for a loan?
Our aim is to help established and creditworthy businesses with access to finance through our marketplace. Limited companies, limited liability partnerships (LLPs) and non-limited companies that have at least 2 years of filed or formally prepared accounts can apply. In addition, we’ll typically need to see a minimum annual turnover of £100,000 in your latest accounts.
What do we look for when we make our decisions?
You’ll need to submit an online application which can take as little 20-30 minutes to complete. We will also require you to email or upload your most recent filed or formally prepared accounts and up to date management accounts (no more than 3 months old). When making their decisions, the credit assessment team use in-house models which capture the information you provide to us as well as information from credit bureaus (for example, Creditsafe) including your past and current credit score.
Types of loans we offer
We offer business loans from £5,000 to £1,000,000, over a 6 month, 1, 2, 3, 4 or 5 year loan term. Loans have a fixed rate and a fixed monthly payment. The level of security required depends on the loan value and the purpose of the loan, and may include a personal guarantee, a security over a specific asset, or security over all of the assets in the business.
- Loans from £5,000 – £100,000 are generally unsecured in their nature, but a personal guarantee will be required from director(s) in almost all circumstances. Typically, no business security is required. These are highly flexible and can be used for a wide range of purposes, including working capital, expansion capital, asset purchase and more.
- Loans from £100,000 – £1,000,000 are generally secured:
All asset security is where we take a charge over all assets in the business (sometimes as a second charge).
Specific asset security is where we take a charge over specific assets in the business using a chattels mortgage.
Property security is where we can take a charge over specific properties as a mortgage (usually a second charge).
Large asset purchase is generally from £30,000 – £1,000,000. This is where we hold the title of the asset that is purchased or refinanced as security and we use a hire-purchase agreement.
Please note that a personal guarantee from the director(s) may be required in any of the circumstances above.
Who’s lending to me?
Funding Circle is a peer-to-peer lending marketplace and most loans are auctions. It’s likely that several hundred different people and organisations (investors) will bid on your loan request and they will be offering as little as £20 to fund your loan. Investors will have access to key financials for the business, the credit score and details of why you need the loan. This is taken directly from your application so it’s best to answer this section in as much detail as possible, so that investors can decide if they wish to lend to the business. They can also ask you questions about your application, and we recommend answering these as quickly and in as much detail as you can!
What’s the interest rate?
If your loan application is successful, the business will be given a risk band according to our in-house risk models. This will be one of five: A+, A, B, C and C-. A+ is considered lowest risk. The final interest rate you will pay back on your loan will depend on many factors, but the risk band is probably the most influential. The rate is calculated as the weighted average of all of the bids from investors at the time the auction closes, and this can range between 6-15%. You can accept the loan and start the acceptance process as soon as the loan is fully funded, but it may be worth allowing the auction to finish as the average interest rate may fall. This is because investors are unable to withdraw or cancel a bid and so the funds have been committed at that point. Only the lowest interest rates are accepted into the loan, and this process is entirely automated. You’ll probably see the highest rates knocked off as investors undercut one another and compete to become part of the loan.
What fees do we charge?
The fee will depend on the term of the loan:
6 or 12 months: 2%
2 or 3 years: 3%
4 or 5 years: 4%
Large Asset purchase: 5%. This is always set at 5%, irrespective of loan term.
The fees are paid upon acceptance of the loan only and you will receive the loan amount net of our fee. E.g. If you are successful in applying for £100,000 over 3 years, you will receive £97,000. If you are not happy with the rate at the end of the auction then that’s absolutely fine; you are not obliged to accept the loan offer and no fee is charged.
How are the repayments structured?
Repayments are usually in equal monthly instalments over your chosen time period. We will need you to set up a direct debit to ensure payments come in on time for the investors. The first repayment is due one calendar month after the auction closes so it’s really important to get your documents in to us as early as possible as we are unable to be flexible with this! Unlike banks and other lenders, there are no early redemption fees so you can settle your loan early. All we ask is that you pay the outstanding capital and interest that is due for the month of repayment.
Can I apply for a multiple loans?
Applying for a second loan is easy. It’s exactly the same process as before, but you’ll need to use a different email address when you sign up again. To apply for another loan, you’ll typically need to have made between 3 – 6 repayments on your existing loan, although each application is treated on a case by case basis.
If you are unsure about any of the above or would like to discuss your options, our team are more than happy to help. You can give them a call on 0207 401 9111 and press option 2 for the business team.