How to start lending to businesses through Funding Circle
If you’re interested in becoming an investor with Funding Circle, but still have a few questions about how it all works, then this is a great place to start. As you’ll soon find out, getting going as an investor is really easy and you’ll be up and bidding in no time!
How can I lend to businesses?
Any resident of the UK can get involved in peer-to-peer lending by lending money to UK businesses through the Funding Circle marketplace. Each loan request is funded using an online auction, where people bid against one another in multiples of £20. They can offer rates of typically between 6% and 15%; whatever rate they are happy to lend at. As you’re bidding against other people, you’ll need to ensure your bid is competitive enough to become part of the loan. If the bid is successful and the business accepts their loan offer, investors hold what’s called a ‘loan part’. As an investor, you are free to buy and sell loan parts from other investors, so you don’t have to be tied to a loan for its duration.
Step 1 – Create an account
Firstly, you’ll need to create an account on the Funding Circle website, using your email address. You’ll need to provide information such as your name, date of birth and address history so we can identify you at a UK address. Once you have successfully created your account, you’ll have complete access to the marketplace, allowing you to view details of the businesses that are currently looking for funds. It may be worth looking through each tab of your account to familiarise yourself with the content.
Step 2 – Credit your Funding Circle account
To start lending money to businesses, you will need to deposit funds into your Funding Circle account. You will need to click on the ‘Transfer Money’ tab in your account to do this. You can either use a debit card, where a minimum deposit of £100 is required, or you can make a bank transfer where there is no minimum. Funds transferred using a debit card will appear in your account immediately, however bank transfers can take up to 3 working days to arrive. It’s worth noting that if you plan on lending though a limited company, the account is restricted to bank transfers.
Step 3 – Lend money to businesses
Once your account is funded, you can start lending to businesses. The minimum bid size is £20. There are two different ways to lend to businesses on the marketplace:
1. Automatic lending using Autobid
Most users opt to use the Autobid tool to lend their money quickly and easily to businesses automatically. It’s also a great way of diversifying your lending. You choose the level of risk, the interest rate and the maximum exposure you’re comfortable with for each business, and Autobid will lend your funds on your behalf.
2. Choose businesses yourself
You can review details of each business looking for funding on the loan request page of your account. There is a lot of supporting information on each loan if you click on the loan title, which will help you make your lending decision. You’ll see their risk band, region, sector, the business’s ﬁnancials and reasons for the loan.
When you find a business that interests you, decide how much you’d like to bid and at what interest rate, using the two drop down boxes on the right hand side of the screen. Even if the loan request is fully funded you can still place a bid, but it will have to be at a lower rate than another person’s bid.
You can also buy and sell loan parts from other people. If you’re looking at lending to another loan, or you wish to withdraw your funds, you will need to sell your loan parts. You can do this in a quick and easy 2-step process by clicking on the ‘Sell’ tab in your account. This is a really useful option if you’re looking to diversify your lending portfolio, as you can buy loan parts for all repaying loans since we launched, instead of waiting for new loan requests.
Now I’ve lent my money, what’s next?
Repayments from businesses come in every month and are distributed in equal instalments over the course of the loan. You’ll be able to keep track of your progress using the Summary Page in your account. You can also download a statement so you can clearly see how much capital has been repaid and what interest you’re earning.
If you have any questions about your account or would like help navigating around the site, please feel free to call the team on 0207 401 9111 or you can email us.