Introducing whole loans

It’s been a fantastic start to the year at Funding Circle. The announcement of additional funding by the Government-backed British Business Bank and the introduction of regulation by the FCA helped to drive a record quarter of lending, with more than £53 million lent to small businesses across the UK – more than two and a half times the amount during the same period of 2013.

At Funding Circle our goal is to build a better financial world by helping as many businesses as possible to access finance, and investors to earn attractive returns.

Over the last few months you will have seen an increase in lending opportunities with record levels of demand from businesses across the UK. Within the next 12 months we expect demand to increase substantially, and our aim over the next few years is to grow to become a significant part of the small business lending market. In the UK, this is an estimated £7.5bn per month market.

To achieve this we want to ensure we have a diverse range of investors at Funding Circle. More investors helps us to attract more businesses, as we have seen from the Government’s involvement. This helps to deliver more lending opportunities for everyone and ensures long-term stability and sustainability for the Funding Circle marketplace.

As you will probably be aware, we have mentioned before that there is a lot of interest from organisations, such as pension funds, insurance companies, family offices and hedge funds, to join Funding Circle to lend.

We have been considering the best way to introduce these new types of investors to the marketplace in a way that is sustainable and also protects the experience of individual investors.

As part of our considerations we have closely followed the developments of the US peer-to-peer lending market over the last 18 months, where larger investors have purchased whole loans rather than lots of individual loan parts. This has shown to us that introducing the ability for investors to buy whole loans is a successful way of creating more lending opportunities for everyone, whilst also protecting individual investors’ Funding Circle experience.

Today we’re announcing that from early May we will be starting a one month ‘whole loans’ trial with a small group of non-bank financial institutions who will lend up to £3m in total. These whole loans will be purchased in full and it will not be possible for individual loan parts to be purchased, as is the case with the ‘partial loans’ that are listed today.

Initially, this will be a closed trial and last for one month beginning 1st May. During the trial whole loans will not be visible on the marketplace; however we will continue to publish details of every loan in our loan book and clearly indicate whether a loan is a whole loan or a partial loan.

While we anticipate most investors will continue to prefer lending on partial loans, once the trial has been successfully completed we will make whole loans available to any interested investors. You can register your interest after the trial by contacting us at

Today’s news does not mean individual investors will become any less important to us. Helping individuals earn attractive returns by backing British businesses is in the DNA of Funding Circle. It is something we are very proud of and will remain a core part of the business as we grow.

For more information about today’s news, visit our FAQs or join us on our forum where we will be discussing this in more detail. You can also read more here about how whole loans have worked in the US.

The Funding Circle team


Head of Corporate Communications


5 thoughts on “Introducing whole loans

  1. There is an obvious problem here. Businesses come to Funding Circle because they have been unable to secure funding through a bank. These ‘larger investors’, pension funds, insurance companies, family offices and hedge funds will almost certainly require security for the loan and a minimum of risk. The capital risk in shareholding is controllable through a market that you can offload stock to at any time. FS lenders on the other hand have a far less liquid position and certainly if a lender defaults I cannot imagine other FC investor wanting to buy. The result is the potential for ‘cherry picking’ leaving your existing FC lenders with higher risk propositions.

  2. I agree with Paul S. In my view the institutions will pick off the best rated opportunities leaving the smaller lenders working at the poorer end of the market. that may mean better returns gross but far more risk. I for one are uncomfortable with this as it will be the start of FC joining the lending crew that caused its reason to be in the first place. Conversely, though, as a borrower I don’t suppose I would be too bothered!

  3. Hi Paul and Jon,

    Thanks very much for your comments. I wanted to give you a bit more detail on the issues you’ve raised.

    All loans will have will to go through our rigorous credit assessment processes before they are listed on the marketplace, so there will be no difference in the quality of loan listed as either partial or whole.

    All whole loans will be randomly allocated (risk class, loan value, loan duration, region and sector), so no ‘cherry picking’ will take place. Every investor on the marketplace (individuals and organisations) will have their own criteria and objectives on what they’re looking for, and this will be no different for newer investors. You will continue to be able to see details of each loan in the loanbook, and be able to keep track of loans listed either partially or whole.

    We will manage the balance of whole loans to help protect the experience for people lending. We anticipate that over the next few months, the volumes will be relatively small – the trial is limited to a maximum of £3 million – and along the lines that we have seen in the US. I know we put this in the blog post as well, but this post from Orchard about whole loans in the US is well worth a read.…n-lendingclub/

    Overall though, having a diverse mix of investors will not only allow us to help thousands more businesses access the finance they need, but will ensure the marketplace is sustainable for the long term.

    Please get in touch with any further thoughts.


  4. Hi, I see a fundamental problem with this idea. The private investor invests his own money, and personally takes risk for each loan. whereas the institutional investors eg pension funds are investing other people’s money and dont care what happens, and will opt for unrealistically low rates. this will push the rates downwards, and the lending wont be profitable. I think FC should only allow lenders who use their own money, not to corporate fund managers who manage other people’s money. DONT DO THIS! I think this is the point at which FC will deteriorate as a lending nexus. The entire reason the stock exchange is so risky is because it is dominated by the funds who invest other people’s money, FC will become big and uncompetitive like the stock exchange. Rates will be pushed down to the 3% that occurs with stock exchange dividends. This is another example of the big greedy souless companies elbowing out the small investor.

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