Introducing net returns and diversification data


We want lending at Funding Circle to be as straight-forward as possible so we’re always looking for ways to improve the information we provide you. Having spoken to many investors over the past few months, we can see there are some valuable changes we can make:

  1. Displaying net returns after fees and bad debt: to show an average across all investors and also showing individual net returns in your account.
  2. More information on the distribution of net returns across investors and how these returns vary by level of diversification: allowing you to compare the returns for those investors lending to a handful versus those lending to hundreds of different businesses.

This new information will not only help you make more informed lending decisions, but make it simpler to track the returns you earn as a result. We’re part-way through these changes and you’ll see them across the site in the coming weeks, but in the meantime we wanted to share a preview with you.

The average net return (after fees and bad debts) across all investors who have been lending for more than 180 days currently stands at 6.2%. 75% of investors that are lending to at least 100 businesses (with a maximum exposure of 1% of their total lending to any one business) have earned more than 6% net per year. The charts below show the distribution of net returns for investors who have lent to a least 100, 50 or 10 businesses with a 1%, 2% or 10% maximum exposure respectively.

You can read more about the net returns and diversification calculations, the methodologies used and their limitations in our post on the Funding Circle forum, together with comments from other investors.





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Government to start lending through Funding Circle

Click the image to view the supporting infographic: The Rise of Peer-to-Peer Lending


In December, the Government announced that it was their intention to lend £20 million to British small businesses through Funding Circle, as part of the Government’s Business Finance Partnership scheme (BFP).

Today, we’re pleased to confirm that the process with the Department for Business Innovation and Skills (BIS) has been completed, contracts have been signed and from Monday 25th March, the Government will start lending.

Before this begins, however, we wanted to update you all on how this will work and why we believe Government involvement will increase awareness of Funding Circle in the business community and consequently provide more lending opportunities for investors.

Why is the Government doing this?

Despite many initiatives to stimulate bank lending over the last few years, net lending to businesses has continued to decline. Whilst bank lending to businesses has deteriorated, Funding Circle has rapidly grown. In two years since we launched, thousands of British people have helped to lend nearly £90million to more than 1,700 businesses. In the last 30 days, investors have lent £10m to British businesses.

The Government has now recognised the impact that non-bank channels, such as Funding Circle, can play to help ease the flow of finance to businesses.

How will lending work?

From Monday, the Government will start lending to all businesses which meet their criteria (more details on this are available in our FAQs). They will fund each loan at a set amount which will be fixed at any point of time.

This will start at 20% of the total loan amount, as shown in the picture below, and will decrease over time as the £20 million runs down and the value of loans being accepted through Funding Circle increases.

The remaining 80% of a loan will be funded in the normal way and your lending experience will stay the same. Once a loan closes, the Government will fund the 20% at the average interest rate of all successful bids on that specific loan.

The Government will only take part in new loan requests and will not purchase any loan parts from existing investors.

Will this affect opportunities to lend?

Since the Government first announced plans to lend through Funding Circle we have seen an upsurge in interest from businesses. Many businesses have told us that this is directly as a result of the Government news.

Interest from businesses has particularly picked up over the last two months. As result, in the last 30 days there have been more opportunities to lend than ever before with £10m being lent to more than 170 different companies. The Government’s involvement will also allow us to list larger loans on to the marketplace and as such we have increased the upper loan limit to £1 million.

There is approximately £7 billion of lending to businesses every month in the UK, so the opportunities remain significant. We will be working hard over the coming months and focusing our efforts on attracting more businesses to join Funding Circle.


We hope that you feel this move is an exciting and positive step for Funding Circle, and will help produce more opportunities to lend. We are absolutely committed to ensuring everyone continues to enjoy lending through Funding Circle.

If you would like to find out more information, you can read our FAQs, or head over to the forum to join the discussion with us and other members.

The Funding Circle team

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8 small business super trend you should know about


The increasing influence of Internet services and mobile technology coupled with the prolonged effects of the economic slowdown has created a rapidly changing world for small businesses. To help you get a grasp of what small business trends are making waves this year, we’ve compiled a list of the most prominent themes being written about on business websites.

1. A flexible workforce

Everyone has their own take on how to implement this or what the effect could be but this is definitely the key small business super trend at the moment: finding new ways to get the job done with a variety of flexible resourcing solutions:

2. Cross border opportunities

The ever growing power and increasing ease of access to sales platforms like eBay, Amazon, Etsy and online in general means that even the smallest players can take their business global without much effort and all. And with the World’s online population as your potential customer base, the rewards could be huge!

3. Access to funds

As the banks tighten their purses and the funding gap to small businesses increases, owners and financial managers are turning towards more innovative solutions such as Crowdfunding for startup ideas and peer-to-peer lenders like Funding Circle for small business loans.

4. Getting into the Cloud

If a flexible workforce is something you are looking at, then cloud technologies and services could be the tools to help you achieve this. The simplest example of an effective use of cloud services is how easy it is to share and co-create documents using Google Docs, which also happens to be free to use saving your company a stack on license fees. Cloud solutions also allow small businesses to hit the ground running without massive upfront investments in storage, infrastructure, software and networking allowing the solutions to scale as the business grows.

5. Social media

Everywhere you turn, people will be telling you to leverage social media as marketing transforms from broadcast to a conversation. That said, things have changed a bit since last year as Facebook increases it’s throttling of free content, encouraging you to pay for it to be seen by your own fans, and as Google+ rises to prominence and starts to integrate into the rest of Google, most importantly search results. This is definitely a space to watch. If there’s one thing you do in social right now, it should be to get your company’s Google+ page up and running.

6. The mobile revolution

Another big trend that has continued from last year is the mobile revolution, which is set to be bigger than ever. You have no excuse not to optimise your website and communications for your mobile-using customers. Mobile’s share of global web traffic accounts for nearly a quarter of all traffic and your company runs the risk of becoming irrelevant if it’s not on mobile. The UK also has the world’s highest mobile web usage.

7. Pay more attention to your data

Put simply, there’s a lot more data about your customer out there than there used to be. There is a major shift towards getting better at using data and you’ll often hear the term ‘big data’ being thrown about. The consensus from all this attention is that all businesses should be focussing on how this growth in data availability can be leveraged to improve your customer experience and ultimately grow your bottom line. But remember to back it up and keep it secure so you don’t fall foul of regulation!

8. The changing high street

We’ve all seen the horror stories of flagship brands like HMV, Woolworths and Blockbuster shutting down on the high street over the past few years; it’s even a problem on the American main streets. The approach to the high street model is going have to change suggests e-Nation who are strong believers in pop-up shops as a lower-risk way for smaller entrepreneurs to enter the high street.


References: Picture credit: Johnji

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Labour recommends income tax deductibility for peer-to-peer lending

Funding Circle investors have long been asking us what we have been doing to encourage tax incentives for lenders. For a long time now we have been campaigning for income tax relief on loans and actually for extensions to schemes like EIS to allow lenders to pay NO TAX on lending they do at Funding Circle given the economic benefit created.

On Monday we attended the launch of the Labour small business taskforce report, and now that the report has been issued we are pleased to announce that the Labour party are now recommending that losses incurred in peer-to-peer lending can be off-set against income tax rather than capital gains tax. The full report can be seen here (we have a nice mention on page 26!). This is the first time a major political party has recommended a favourable tax change for peer-to-peer lending. Here’s the relevant extract:

8. Government should give active support and encouragement to emerging alternative finance marketplaces and their participants. This means understanding the particular business models adopted by new providers and the challenges they encounter. For example, the growth of marketplace lenders is being constrained because they must pay interest income tax calculated before lending losses. This makes it unprofitable to lend to riskier businesses. The government should permit marketplace lenders to calculate income tax obligations based on interest net of bad debts, rather than pre-bad-debts.

We can now use this to campaign with the existing Government to adopt these measures. I don’t want investors to get their hopes up, but often when one political party recommends something like this it can be quickly taken up by the current Government if there is enough momentum. This is a good step in the direction of eventually getting complete tax relief for people who lend via peer-to-peer lending.

I know it may seem like these things are very slow, but behind the scenes we are working hard to improve the regulatory and tax environment for our lenders.

Samir, CEO

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