Peer-to-peer lending to be included in Isas

Week 12: 17 – 23 March 2014

It was a fantastic week for the peer-to-peer lending industry as the Chancellor confirmed that peer-to-peer lending will be allowed within tax-free individual savings accounts (ISAs) for the first time. In addition to this, we saw over 100 new loans come onto the marketplace and the majority were allocated to the B risk band.

New loans

There were 102 new business loans listed last week and there are currently 91 auctions on the marketplace.

The total value of the new listed loans was £5,169,560; that’s an average of £50,682 per loan. The largest loan value was £150,000 and the smallest loan value was £8,000.

Business loans still available for bidding on for the next 3 days or more:

Weekly marketplace trends

These graphs show the most recent activity on the marketplace. The average gross yield graph is reported weekly and shows a rolling two week average. Number of loans, value of loans and secondary market are reported weekly. The dates on the graph should be read as ‘week beginning’, for example: 17-Mar represents the week of 17th – 23rd March.

Weekly average gross yield (2 weeks rolling)

yield

Number of listed loans per week

number

Listed loan value per week

value

News you should know about

A great budget for peer-to-peer lending

In last week’s Budget it was revealed that peer-to-peer lending will be included in Isas and there will be a consultation into the referral of small business leads from banks to alternative funders.

Recommend a friend and share £80

If you recommend a friend to Funding Circle and they lend at least £1,000 to Funding Circle businesses, you could each have £40 cashback* paid into your Funding Circle accounts!

Community Discussions

This week we’re talking about loan parts and how the buyer’s price is calculated. You can join the discussion on our community forum.

Unsure how to get started with lending?

Take 5 minutes to read through our blog which explains how to start lending to businesses through Funding Circle.

Loans defaulted last week

Travel operator. Loan ID 4236

This London tour operator  has been trading since 2007 and has fallen into arrears with repayments. The original loan amount was £15,000 and £30,000, and all 234 investors have been notified.

Hair and beauty salon. Loan ID 2863

This Grantham business has been trading since 2003 and we’ve received notice of a change in financial circumstances. The original loan amount was £50,000 and all 647 investors have been notified.

Our insolvency team are working to recover the outstanding amounts for all of these loan.

Enjoy lending, The Funding Circle Team

 

* Terms & conditions apply.

 

A great Budget for peer-to-peer lending

Included in the small print of today’s Budget were two big announcements for the peer-to-peer lending industry; ISA inclusion and a consultation into the referral of small business leads from banks to alternative funders.

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Peer-to-peer loans allowed into ISAs

In section 1.169 of the full document, the Chancellor confirmed that peer-to-peer lending will be allowed within tax-free individual savings accounts (ISAs) for the first time. The move follows a consultation over the last few months and will further increase the choice that ISA savers have in terms of how they invest.

Our data shows 41% of investors will invest more in peer-to-peer lending now that it has been included within ISAs. This is a huge win for British investors up and down the country, and represents a seminal moment for the industry. The news comes ahead of formal regulation of the peer-to-peer lending industry from 1 April, and you can read more about it in the Financial Times.

We’re in discussions at the moment with the Government about how this will work and a formal timetable for when it will be introduced. We’ll update you with more information when we have it.

New consultation into the referral of small business leads

Also included in today’s Budget (section 2.234) was confirmation that the Treasury will launch a new consultation into the mandatory referral of small business leads from banks to alternative funders, where the former are not able to lend.

We want to help thousands of British businesses access the finance they need to grow, and we have already been talking to a number of banks about the possibility of referring small businesses to Funding Circle.

Today’s news is a welcomed step and another example that peer-to-peer lending and banks can be complementary sources.  A core part of a bank’s business is having a positive banking relationship with their customer; partnering with a non-bank provider, like Funding Circle that does not offer the range of products, (business current accounts etc.), that a bank does, makes a lot of sense to us.

News

Crowdfunding or peer-to-peer lending – which is best for my business?

Crowdfunding or peer-to-peer lending? This is the question many business owners are asking now that these alternative forms of business finance have become mainstream on the back of ineffective lending from the banks. So the ultimate question then is, which method of finance would work best for you and your business?

Crowdfunding and peer-to-peer lending are two innovative ways to get money into your business. They’ve been making headlines over the past few years and it’s fair to say that you’ll have had to have been hiding under a rock for you to not have heard of at least one of them!

A lot of people actually don’t realise that crowdfunding and peer-to-peer lending are two very different beasts; both share the same principle of raising finance from a number of people who pool together, but it’s likely that one will better suit your business needs, depending on what stage your business is at.

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If you’ve got a great idea and need some help getting it off the ground, crowdfunding is for you.

Crowdfunding is a great option for startups and early stage businesses. You “pitch” your idea or business to potential investors, and if interested, they will contribute a sum to the proposed venture. Then you decide how you want to reward those lovely people who helped you make it happen.

Crowdfunding in its earliest form focussed on helping entrepreneurial creatives and inventors to get their creative ideas off the ground. The people who chipped in and made their dreams a reality were then given something in return, like a unique perk, a gift, or first dibs on their product. This is what’s known as reward-based crowdfunding – one to consider if you’ve got a cool little gadget you want to develop. Kickstarter is the world’s largest reward-based crowdfunder, and has just passed the milestone of $1 billion pledged; $54 million of that has come from the UK.

Like all new things, the concept of crowdfunding has evolved into different forms, with investment crowdfunding now starting to grow rapidly. In this model, instead of giving a reward to those who helped, you actually give them equity in your business. Key UK proponents of investment Crowdfunding are Seedrs and Crowdcube.

What will my business need to be crowdfunded?

Crowdfunding platforms will typically want a business with a business plan and financial forecasts from you when you make your application, so it’s important you get these in order. You could take a look at Planwriter or iAdviseUK for some tips on how to get these right.

If you did want to go down the investment route and release equity in your business, there are quite a few legals that you’ll need to deal with and you’ll also need to make sure you keep your shareholders in the loop with what’s happening further down the line.

To help you get started, Nesta have some general crowdfunding tips, from pre-launch to how to tell your story. Entrepreneur also provides 5 steps to crowdfunding success, placing importance on interaction with your supporters and considering feedback.

If you’ve got an established business then peer-to-peer lending is the one for you

Peer-to-peer lending is a fast and accessible way of getting a cash injection into your business. The essential difference between this and investment crowdfunding is that you do not give away any equity, but rather pay interest on the money you borrow, much like you would with a bank. Whether your loan is for a piece of kit for your factory, purchasing a property, buying stock or even working capital, peer-to-peer lending for businesses offers the most accessible and flexible way of getting finance for established businesses.

Peer-to-peer loans are usually funded by a number of different people, and in the case of Funding Circle, you’ll also have your loan funded by local councils, Huddersfield University and the Government-backed British Business Bank Programme.*

Peer-to-peer lending is a viable alternative to traditional funders, as you can apply for loans up to £1 million in the case of Funding Circle and £3 million for Thincats, repayable over terms of up to 5 years.

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Tushar & Mehul Shah from Bluebird Care. The business borrowed £150k from peer-to-peer lender Funding Circle.

What sort of credentials will my business need to have?

Peer-to-peer lending is suitable for all established business, including limited companies, limited liability partnerships and non-limited companies, generally trading for at least 2 years or more. As part of the application, you’ll have to provide your businesses financials (filed accounts or equivalent) and reasons for why your business needs a loan. This information should be pretty easy to source, so by way of preparation there isn’t that much extra you’ll need to do.

It’s worth noting that depending on the size of the loan you’re after, security in some form will be required. This could either be a personal guarantee or they may take security of a particular asset or assets in your business. You should check when you apply, as each platform will have different policies.

Which would work best for my business?

In a nutshell, if you have a great idea that’s yet to get off the ground, then go for crowdfunding. But, if your business is well established and you’re looking for a business loan, then you’d be better suited to one of the peer-to-peer lending platforms.

Hopefully we’ve shed some light on the differences between the innovative finance options out there. Both are viable, but it’s important to evaluate the pros and cons of each model before you decide.

And finally…

This week, the UK’s leading alternative business funders met to launch a web portal designed to help you find the the most appropriate source of funding, which should aid with your decision making.

* The British Business Bank programme is currently run directly by the Department for Business, Innovation and Skills and is not authorised or regulated by the Financial Conduct Authority or the Prudential Regulation Authority. British Business Bank plc will operate as a Government-owned financial institution once HM Government has received European Commission State aid clearance, which is expected in 2014.

 

Rules for peer-to-peer lending announced. Your weekly lending review

Week 10: 3 – 9 March 2014

Last week, 97 new loans were listed on the marketplace, most of which were allocated to the A risk band. The majority of businesses looking for funding were located in the South East of England and the most popular business sectors were manufacturing and property & construction.

New loans

There were 97 new business loans listed last week and there are currently 90 auctions on the marketplace.

The total value of the new listed loans was £5,285,700; that’s an average of £54,492 per loan. The largest loan value was £150,000 and the smallest loan value was £6,000.

Business loans still available for bidding on for the next 3 days or more:

Weekly marketplace trends

These graphs show the most recent activity on the marketplace. The average gross yield graph is reported weekly and shows a rolling two week average. Number of loans, value of loans and secondary market are reported weekly. The dates on the graph should be read as ‘week beginning’, for example: 3-Mar represents the week of 3rd – 9th March.

Weekly average gross yield (2 weeks rolling)

yield

Number of listed loans per week

number

Listed loan value per week

value

News you should know about

Peer-to-Peer Lending Regulation

Last week, the Financial Conduct Authority published the final rules for peer-to-peer lending which will take effect on 1st April.

The top 6 P2P industry news articles from last month

Including the Daily Telegraph kicking off a campaign which called for peer-to-peer lending to be included within a stocks and shares Isa.

Recommend a friend and share £80

If you recommend a friend to Funding Circle and they lend at least £1,000 to our great British businesses, you could each have £40 cashback* paid into your Funding Circle accounts!

Community Discussions

This week we’re talking about display suggestions for the loan request page. You can join the discussion on our community forum.

Unsure how to get started with lending?

Take 5 minutes to read through our blog which explains how to start lending to businesses through Funding Circle.

Loans defaulted last week

Camping shop. Loan ID 1950

This Swansea business has been trading since 2003 and has failed to keep up with repayments. The original loan amount was £51,500 and all 568 investors have been notified.

Windows manufacturer. Loan ID 1873

This Newark business has been trading for 6 years and went into liquidation in December. The original loan amount was £25,000 and all 238 investors have been notified.

Printing company. Loan ID 71

This Wiltshire business has been trading for 20 years and has failed to keep up with repayments. The original loan amount was £30,000 and all 253 investors have been notified.

Solicitors firm. Loan ID 3298

This St Albans legal firm has been trading for 6 years. The original loan amount was £100,000 and all 1,076 investors have been notified.

Our insolvency team are working to recover the outstanding amounts for all of these loan.

Enjoy lending, The Funding Circle Team

* Terms & conditions apply

Read last week’s lending review

Regulator announces peer-to-peer lending rules

Yesterday the Financial Conduct Authority published the final rules for peer-to-peer lending. This will formally kick in on 1st April and follows a consultation over the last four months to ensure proportionate regulation to protect both investors and borrowers, whilst also enabling the industry to continue to flourish.

Funding Circle has been lobbying for regulation alongside other members of the Peer-to-Peer Finance Association for a couple of years now, as we felt it was very important for our customers to be properly protected.

As James Meekings, one of our co-founders said yesterday in response to the news: “Peer-to-peer lending is now a £1 billion industry and it is predicted to grow to over £12 billion per year within the next decade. Funding Circle alone is currently facilitating £20 million of loans every month so it’s only right that a industry of this size becomes regulated, giving consumers even more confidence that peer-to-peer lending is here to stay.”

The introduction of proportionate regulation is a step-change for the peer-to-peer lending industry and we believe it will cement our position within the wider financial landscape.

Take a look at James responding to the news on BBC Breakfast here. If you have any questions about the new rules, you can always get in touch with us and other community members on our forum.

First Peer-to-Peer lending industry conference of many. February industry news

This month saw the first Peer-to-Peer Finance Association annual industry conference, as well as continued speculation about Isa inclusion. The Government-backed British Business Bank also announced they would be investing a further £40 million in small businesses through Funding Circle. Here’s a selection of the month’s peer-to-peer lending industry news.

Peer-2-Peer-Finance-Association logo

Lend-to-save more than doubled last year as savers turned to alternatives amid crumbling bank rates

At the beginning of the month the Peer-to-Peer Finance Association released figures from 2013 which showed the industry – including both business and consumer lending – had more than doubled in 2013. The data found last year that there were over 3,700 business borrowers, 70,000 consumer borrowers and more than 86,000 active lenders in Britain. Finextra and Financial Reporter also covered the news.

Banking without banks

The Economist covers the discussion had at the industry’s first official annual gathering last week. The Peer-to-Peer Finance Association conference heard from industry experts, borrowers and investors, the platforms themselves, and the regulator ahead of formal regulation in April.

Make Isas fit for purpose

The Daily Telegraph kicked off a campaign to update our Isa system. The newspaper calls for peer-to-peer lending to be included within a stocks and shares Isa as part of this. We’ve been in conversation with the Treasury and other industry players over the last month or so to discuss what this might look like and how it might work. This is Money covers the consultation in a bit more detail.

Funding Circle announces broker roadshows

This month our business development team are on the road to meet brokers across five locations, and talk to them about how we can work better together to help thousands more businesses access the finance they need to grow. We will be running sessions for new and existing introducers, so get in touch if you’d like to come along.

Pioneering university is on course to lend £1million to small businesses

A year after committing £100,000 to small business lending, the University of Huddersfield has increased its Funding Circle investment to £1 million. It’s currently the only university to lend through the platform and puts all interest earned towards a student scholarship scheme.

Funding Circle gets £40m from UK government

And finally, we end with the news that the British Business Bank has decided to invest £40 million in small businesses via the Funding Circle platform. This follows an initial investment made in March last year via the Business Finance Partnership, which has now all been lent out to approximately 2,500 businesses helping to create an estimated 6,500 jobs. The Times, Growth Business and Bridging & Commercial also covered the news.

Your 5 minutes with.. the Credit Analytics team

Following on from our interview with the Credit Assessment Team, we’re now with Rahul, James and Hossein, who make up our credit analytics team. These guys are our data experts and build statistical models for every part of our business, including that ‘in house credit model’ I referenced in the last interview.

Although there are only 3 of them, what they lack in numbers, they make up for in experience. Rahul started at Funding Circle in 2012, and James and Hossein came on board in 2013. Between them they share an impressive 3 undergraduate degrees, 3 MBAs, 1.5 PHDs and 17 years working in risk and consulting. Pretty good eh?

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In a nutshell, this team builds models.

The credit analytics team builds statistical models to predict the future, which we base a good portion of our business decisions on. The main area they focus on is credit risk, or in other words, the probability of a business not being able to pay back their loan. Statistical models are involved in all parts of Funding Circle so as a result, they work closely with teams across the company. And, especially close with those on the credit team, and together they form our Credit Committee.

Welcome to the interview. I have to say, this is going to be as much of a learning experience as it is running an interview! Can you take me through your day-to-day activities?

Rahul: Yes of course. A lot of our time goes into collecting data. We’re responsible for the credit infrastructure so we can build and refine our models. So to do that, we interact with data collection bureaus like Experian and Creditsafe to obtain the information we need. The other half of our time then goes into analysing the information that we’ve collected. We build excel-based models for a wide variety of needs; assessing and quantifying the risk of a loan for example. Every statistical model related to any part of the business comes through us.

OK, so what does that mean in the context of risk?

Rahul: Every borrower will have an expectation of loss. Our credit assessment team will use the expectation which the model provides, to approve or reject the loan application. If we expect the loan to default then a loan is rejected. But, models have errors in them inherently. This means that of the businesses we have approved, we still have an expected and estimated target loss rate.

Our intent is not to have zero losses, our intent is to have a precise estimate of what the loss rate is. eg. in the A+ risk band, we expect 0.6% of loans to default, net of recoveries.

The goal of our team is to not only make sure our loss rates and assessments are accurate, but also to ensure that our portfolio experiences the loss rates that we publish. We utilise the data from our loan book which has over 3 years of information to allow us to rebuild our models regularly to incorporate new information.

How did you come into building models, do you all have financial or statistical backgrounds?

James: I joined about 5 months ago, and prior to Funding Circle I was actually in academia. I studied theoretical physics at university and I have a Masters in financial maths.

Hossein: I did my PHD at Stanford and then I attended the Business School. I’ve also worked with a quantitative hedge fund and I’ve advised a number of startups in Silicon Valley.

Rahul: I studied engineering and then completed my MBA in India. I’ve worked as a consultant, and in risk management areas in a number of banks. I completed my second MBA in the States and then moved to London to work as a consultant, before starting at Funding Circle.

Quite a range of backgrounds then! So why did you decide to work at Funding Circle?

Hossein: Innovation in the financial industry is very rare, and I think that was the most exciting part for me. Peer-to-peer lending is disrupting one of the oldest professions in the world, and I wanted to be part of it!

Rahul: I was initially approached by a headhunter and then spoke to one of the co-founders Andrew [Mullinger]. He talked so excitedly about the business that I was sold in 10 minutes flat. The role itself also appealed to me; it was more of a startup when I joined so a lot of the processes had to be built from the ground up. The challenge the role presented was exciting, and after working in banks for 10 years I really wanted a change.

James: I was halfway through my PHD and the opportunity of Funding Circle came to me through my professor. I thought my PHD needed a new direction, saw Funding Circle and what it was all about and thought it would be a perfect route to follow.

How do we differ to other places you’ve worked at or had experience in?

Rahul: This is my first experience of working in a company with less than 100 employees, so there definitely are differences. We don’t have the legacy drag that banks have, so I feel our process is much more agile and lean. Changes and improvements take less time to implement which is really refreshing.

Hossein: I’ve worked in startups for the majority of my career. But I’ve worked with larger financial organisations in the past, and I think the key difference is, as Rahul mentioned, the time it takes to make decisions. We get things done quickly, and we have more freedom to research and implement ideas.

James: Well this is my first experience in a workplace environment. Although the research projects I undertook whilst in academics may have had different applications, the underlying theory and methodology can be transferred to a lot of different fields, including credit risk. So there’s a lot of overlap which has made it a smooth transition. In academia, nothing is applied first hand to the real world so you perhaps lose sight of what the goal is. Now I know what we’re aiming to achieve. Not only can you use the stuff you’ve learned, but you actually get to see what happens at the end.

With so many different projects going on, this must be pretty tricky to manage. What would you consider to be the most challenging part of your job?

James: Yeah as we’re always working on a number of different projects, you’re constantly dipping in and out of different areas and teams which can be a challenge, but I wouldn’t want it any other way.

Rahul: There are pros and cons to working in a young company. You can get involved in so many different things, but it may be challenging as there is a limited amount of resource. We have had to build everything from the ground up and when I joined, there was a lot less structure. The hard part is really to get things up and running quickly, when we have limited resources as we’re growing at a rapid rate. This I’d say is a good problem to have.

Hossein: Sometimes you think, “is there an accepted or obvious way of doing something that I’m missing?” That’s what makes it exciting, there isn’t a manual that you just read. You always have to think for yourself.

Exactly, and by thinking all the time, new solutions will be more forthcoming. What do you enjoy most about working here?

James: The culture is really cool, there’s a relaxed atmosphere but there is always direction. I’ve had the opportunity to work with lots of different teams, like the insolvency and marketing teams, which is great because I learn what’s going on in the company. I always know why I’m doing something, which I like.

Hossein: The culture is definitely a huge plus and I enjoy the work itself. It’s so exciting to be a part of the innovation and disruption of one part of the financial industry.

Rahul: Yes I agree, the culture is great. It’s so refreshing working here, we’re young and energetic.

The culture and people have been the most popular answers in this series so far. So let’s finish with this one, do you have any interesting facts or hobbies you’d like to share us?

James: I produce music in my free time, and I’m releasing an EP on a Berlin music label which I’m excited, if not nervous, about.

Hossein: Photography is the thing I like most. I recently bought an iMac which is exciting, there is so much you can do with them!

Rahul: I always wanted to join the army, but I got rejected because I wore thick glasses. So I decided on models instead! And, I really enjoy playing table tennis in the office.

I can vouch for that. For those who don’t know, we have a table tennis table in the office and Rahul puts up a very good fight…

Rahul: Yes, and don’t forget about Ping-Pong Fight Club last year! It was an all Funding Circle final in the competition for London tech startups. Helene (our Technical Project Manager)  played very well, but I managed to beat her!

Helene played competitively at an international level, so that was very good going. And how could we forget, the trophies that Rahul & Helene won for Funding Circle are the largest we’ve won, and have pride of place by our reception area.

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So far we’ve met people in the credit, insolvency and customer relations team. Who would you like to meet next?

 

A record £19m lent to businesses in February

Week 9: 24 February – 2 March 2014

In February, a record £19 million was lent to 332 businesses across the UK, thanks to investors like you.

Last week, we saw nearly 90 new loan requests available for you to lend to. The majority of businesses looking for funding were located in the North West of England and the most popular reason for needing a business loan was for expansion.

New loans

There were 88 new business loans listed last week and there are currently 79 auctions on the marketplace.

The total value of the new listed loans was £5,275,700; that’s an average of £59,951 per loan. The largest loan value was £250,000 and the smallest loan value was £9,500.

Business loans still available for bidding on for the next 3 days or more:

Weekly marketplace trends

These graphs show the most recent activity on the marketplace. The average gross yield graph is reported weekly and shows a rolling two week average. Number of loans, value of loans and secondary market are reported weekly. The dates on the graph should be read as ‘week beginning’, for example: 24-Feb represents the week of 24th February – 2nd March.

Weekly average gross yield (2 weeks rolling)

yield

Number of listed loans per week

number

Listed loan value per week

value

Recommend a friend and share £80

If you recommend a friend to Funding Circle and they lend at least £1,000 to our great British businesses, you could each have £40 cashback* paid into your Funding Circle accounts!

Our iPad app has landed in the App store

You can now download the Funding Circle app for free for use on your iPad. You won’t miss out on the end of auctions again as you can turn on alerts which will notify you of auctions closing.

What did 2013 look like for Funding Circle?

We’ve put a short video together highlighting some of the best moments from 2013: ranging from visiting businesses across the country, to launching Funding Circle in the States, to having the Government, Huddersfield University and local councils all lend alongside the British public.

Government-backed British Business Bank programme to lend £40 million to businesses

We’re pleased to confirm that the Government-backed British Business Bank Investment Programme is lending £40 million** through Funding Circle from its £300 million Investment Programme.

Community Discussions

This week we’re talking about adding premiums to loan parts when you sell them. You can join the discussion on our community forum.

Unsure how to get started with lending?

Take 5 minutes to read through our blog which explains how to start lending to businesses through Funding Circle.

Loans defaulted last week

Italian restaurant. Loan ID 1225

This London business runs an Italian restaurant in the West End and has been trading since 1994. The original loan amount was £100,000 and all 949 investors have been notified.

Rail carriage manufacturer. Loan ID 1017

This West Midlands business had been trading for over 40 years and went into liquidation in August. The original loan amount was £50,000 and all 417 investors have been notified.

Lighting manufacturer. Loan ID 328

This Warwickshire business has been trading since 1999 and has failed to make full monthly repayments. The original loan amount was £25,000 and all 250 investors have been notified.

Electronics company. Loan ID 1327

This business is based in Stratford-upon-Avon and designs and  assembles circuit boards. The original loan amount was £55,000 and all 581 investors have been notified.

Our insolvency team are working to recover the outstanding amounts for all of these loan.

Enjoy lending, The Funding Circle Team

 

* Terms & conditions apply.

** The British Business Bank programme is currently run directly by the Department for Business, Innovation and Skills and is not authorised or regulated by the Financial Conduct Authority or the Prudential Regulation Authority.  British Business Bank plc will operate as a Government-owned financial institution once HM Government has received European Commission State aid clearance, which is expected in 2014.

 

What did 2013 look like for Funding Circle?

Although 2014 is fully underway, we’ve taken a moment to stop and reflect at what 2013 meant for the whole of the Funding Circle community.

We’ve put a short video together highlighting some of the best moments from 2013: ranging from visiting businesses across the country, to launching Funding Circle in the States, to having the Government, Huddersfield University and local councils all lend alongside the British public.

We also look towards the rest of 2014 and what it will mean for our community. There’s no better way to get you excited for the new products that are launching this year, including property finance which will be landing on the marketplace over the coming month.

Here’s to an even more exciting 2014, where we look forward to helping many more thousands of businesses access finance, whilst helping different types of investors earn a better return on their money.