Record day for new loans. Weekly Lending Review

300-million - Copy

 

Week 26: 23 – 29 June 2014

Last Thursday we listed over £2.2 million of new lending opportunities, beating our previous daily record by over £300,000. As a result of all of your lending, we were also thrilled to pass the £300 million lent milestone last week.

There are currently 2 loan requests on the marketplace which have 2% cashback* on them and are still available to bid on. One is a property investment loan for £520,000 and one is a second tranche loan for a property development.

New loans

There were 88 new business loans listed last week and there are currently 60 auctions on the marketplace.

The total value of the new listed loans was £5,270,180; that’s an average of £64,270 per loan. The largest business loan value was £520,000 and the smallest loan value was £5,000.

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 of gross yields. This calculation assumes you reinvest your interest each month and therefore includes the compound interest you earn. Number of loans and value of loans are reported weekly. The dates on the graph should be read as ‘week beginning’, for example: 23-Jun represents the week of 23rd – 29th June.

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

£300 million lent

In just under 4 years, investors have reached a major milestone having lent more than £300 million to over 5,000 businesses; with £100 million of this lent in the last 6 months alone.

Recommend a friend and share £80

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

Community Discussions

This week we’re talking about our investor evening video. You can join the discussion and watch the video on our community forum.

Loans defaulted last week

Software solutions company. Loan IDs 494, 1324, 3058

This Staffordshire business has been trading since 2001 and has entered into insolvent voluntary liquidation. All 804 investors have been notified.

Consultancy firm. Loan ID 1630

This London business has been trading since 1991 and has entered into administration. The original loan amount was £65,000 and 711 investors have been notified.

Our collections and recoveries team are working to recover the outstanding amounts for all of these loans.

Enjoy lending, The Funding Circle Team

*Terms and conditions apply

Lending sails past £300M mark. £100M lent in 6 months

This week, British investors reached a major milestone having lent more than £300 million to UK businesses through Funding Circle in just under four years.

Investors have now helped over 5,000 businesses access the finance they need to expand and grow, creating an estimated 15,000 jobs since Funding Circle launched. Of the £300 million total, £100 million has been lent out in the first six months of 2014 alone.

Fashionizer Couture Uniforms, a specialist designer of uniforms for hotels and spas, borrowed through Funding Circle last year, and also announced this week that they have secured a major global contract to design and supply uniforms for the luxury hotel and spa group Six Senses Hotels Resorts Spas.

The contract comes as a direct result of the £67,000 investment, which included money from the British Business Bank and hundreds of individuals. The business has been so successful that the Deputy Prime Minister Nick Clegg and Business Secretary Vince Cable paid them a visit at the end of last year to see how the money was being used.

Debbie Leon, the Managing Director of Fashionizer, commented on the new contract by saying: “Fashionizer has been trading successfully since 1993 and had focused mainly on UK business with a number of European customers, but I knew that I wanted to move the business up to the next level and compete in the international domain. That requires expertise, hard work commitment and patience – all of which we had – but it also needs financial support.

“That’s where Funding Circle came in. After spending hours with banks trying to convince them that we knew our business and the opportunities available in our niche market, we hit a brick wall. When we approached Funding Circle, the whole process was very simple, efficient, and, importantly, decision-making was quick.”

Thank to your lending, the growth we have seen over the last six months is clear evidence that small businesses place speed, transparency and efficiency at the heart of borrowing. Marketplace lending is increasingly becoming a mainstream part of financial services and there is significant potential for further growth over the next few years. Independent research recently predicted that the global industry could become worth $1 trillion by 2025.

As you know, we recently announced a partnership with Santander which we believe will create thousands more opportunities for small businesses to access finance, and increase awareness of alternative sources of finance, as well as provide more lending opportunities on the marketplace.

Hales Gallery: borrowed over £200,000 from over 3,000 of you

We’re in trendy Shoreditch, London, for our latest case study video with Hales Gallery, who have borrowed money from over 3,000 Funding Circle investors.

Paul Maslin and Paul Hedge have been dealing contemporary art since 1992. Originally from Deptford, they have always wanted to deal in art and help artists to make a living. They helped to launch the careers of a number of Young British Artists during the ’90s boom.

It became clear that they had gone as far as they could in Deptford, which was when they found the site in Shoreditch. They’ve now taken three loans through Funding Circle to ease working capital, borrowing over £200,000 from over 3,000 investors.

They say the business is in the best shape they’ve ever seen it, thanks to all of you.

Watch their story:

Partnering with Santander. Weekly Lending Review

Week 25: 16 – 22 June 2014

Over £5 million of new lending opportunities came onto the marketplace last week, including 14 loans for £100,000 or more, and a further 14 over £60,000. The purpose of loans listed was predominantly working capital (46) or expansion and growth (35). A property development loan for £322,000 is currently on the marketplace and still available to bid on.

New loans

There were 97 new business loans listed last week and there are currently 76 auctions on the marketplace.

The total value of the new listed loans was £5,056,860; that’s an average of £52,132 per loan. The largest loan value was £322,000 and the smallest loan value was £7,000.

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 of gross yields. This calculation assumes you reinvest your interest each month and therefore includes the compound interest you earn. Number of loans and value of loans are reported weekly. The dates on the graph should be read as ‘week beginning’, for example: 16-Jun represents the week of 16th – 22nd June.

Weekly average gross yield (2 weeks rolling)

Yield.jpg

Number of listed loans per week

Number.jpg

Listed loan value per week

Value.jpg

News you should know

We’ve partnered with Santander

Last week we announced an exciting new partnership with Santander UK, which will give thousands of small British businesses greater access to finance. The referral arrangement will see Santander proactively refer small business customers looking for a loan to Funding Circle, where we are better placed to help. This is the first partnership between a UK bank and an online finance provider, and forms part of our commitment to address the challenges of access to finance for creditworthy small businesses.

Investor evening video

Thank you to all who attended our first investor evening held at the end of May. We’ve produced a short video summary which you can take a look at here. For a full write-up, check out the blog.

Recommend a friend and share £80

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

Community Discussions

This week we’re talking about our new partnership with Santander. You can join the discussion on our community forum.

Loans defaulted last week

Bus station cafe. Loan ID 252 & 1041

This Yorkshire business has been trading for 11 years and has fallen behind on its repayments in 2014. The original loan amount was £20,000 and 14,000 and all 366 investors have been notified.

Independent travel agent. Loan ID 2179

This business in Middlesex has been trading for 7 years and and has fallen behind on its repayments in 2014. The original loan amount was £15,000 and all 257 investors have been notified.

Our collections and recoveries team are working to recover the outstanding amounts for all of these loans.

Enjoy lending, The Funding Circle Team

Watch the investor evening video

On 29th May we held our first investor evening, where we had the pleasure of meeting about 30 of you in person. It was a great evening, with lots of interesting debate and helpful feedback. We hope those that attended agree, and many thanks to you for giving up your time to come and say hello.

We appreciate that not everyone is able to travel to London, so we hope you enjoy this short video! For a longer write up, check out what was discussed with the credit assessment and analytics teams here, the tech, product and collections teams here, and the co-founders here.

Watch the video:

Funding Circle & Santander announce partnership to support thousands of UK businesses

Today we are announcing an exciting new partnership with Santander UK, which will give thousands of small British businesses greater access to finance.

The referral arrangement will see Santander proactively refer small business customers looking for a loan to Funding Circle, where we are better placed to help. These referrals will take place on Santander’s website and in letters to customers.

This is the first partnership between a UK bank and an online finance provider, and forms part of our commitment to address the challenges of access to finance for creditworthy small businesses. We believe that by working in partnership, we can help more small businesses grow, and bring investors more lending opportunities on the marketplace.

As part of this relationship, we will also signpost borrowers to Santander where they require day-to-day relationship banking support or other services that the bank can offer, such as international banking expertise, cash management and support for growth.

We have mentioned previously that the Government is currently consulting on whether it should be mandatory for banks to refer small businesses to other non-bank providers. It’s great to receive the backing of the Business Secretary Vince Cable this morning in the Financial Times.

We believe that’s today’s move sets a precedent for how retail banks and alternative finance providers can work collaboratively to deliver an efficient, transparent and honest service.

Samir Desai, our CEO and co-founder said: “This partnership recognises our role as the only marketplace that caters for, and is dedicated to, small businesses. In Santander we have found a fellow challenger brand that shares our commitment to putting small business customers’ needs first. They have created a blueprint for other banks to follow.”

Industry research by alternativebusinessfunding.co.uk estimates that 250,000 businesses a year could benefit from being referred to alternative finance providers by banks.

Santander UK’s CEO, Ana Botin, commented on today’s news by saying: “SMEs need access to multiple sources of finance, and Santander’s partnership with Funding Circle is a good example of how traditional and alternative finance can work together to help the nation’s SMEs prosper. Peer-to-peer financing is also a useful way to introduce people to the concept of investing in entrepreneurs; an important element in a healthy enterprise economy.”

If you have any questions about today’s news, then please get in touch or join in on the forum.

A record week for loan requests! Weekly Lending Review

Week 24: 9 – 15 June 2014

It was a record-breaking week last week as over £7.5 million of new lending opportunities came onto the marketplace. Included in last week’s bumper week for listings were 23 loans valued at £100,000 and above and our largest loan to date. This £650,000 loan is currently on the marketplace and is still available to bid on.

New loans

There were 115 new business loans listed last week and there are currently 76 auctions on the marketplace.

The total value of the new listed loans was £7,548,380; that’s an average of £65,638 per loan. The largest loan value was £650,000 and the smallest loan value was £10,000.

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 of gross yields. This calculation assumes you reinvest your interest each month and therefore includes the compound interest you earn. Number of loans and value of loans are reported weekly. The dates on the graph should be read as ‘week beginning’, for example: 9-Jun represents the week of 9th – 15th June.

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

Bringing more businesses to the marketplace

Over the past few months we have become conscious that a one size fits all approach to borrower requirements will not always work, so we are removing the £150k threshold for loans without asset security. Our credit team will now have more flexibility to assess the security required on a case by case basis.

May’s roundup of peer-to-peer industry news

In last month’s roundup we have the Queen’s Speech, the launch of a global investment fund and figures showing another decline in bank lending to businesses.

Investor evening

Thank you to all who attended our first investor evening held at the end of May. We’ve now completed our write-up of the event so you can read what the collections and tech teams had to say, and what was discussed in the Q&A session with 2 of the co-founders.

Recommend a friend and share £80

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

Community Discussions

This week we’re talking about the largest ever Funding Circle loan that’s on the marketplace. You can join the discussion on our community forum.

Loans defaulted last week

Document collection service. Loan ID 2855

This Blackburn business has been trading since 2005 and has entered into administration.  The original loan amount was £150,000 and all 1,994 investors have been notified.

Our collections and recoveries team are working to recover the outstanding amounts for all of these loans.

Enjoy lending, The Funding Circle Team

* Terms & conditions apply.

Helping more businesses access finance

At Funding Circle we are constantly looking at how we can improve and innovate our offering to build a successful and sustainable marketplace for all of our community.

Over the past few months we have become conscious that a one size fits all approach to borrower requirements will not always work, especially as we see a more diverse range of businesses coming to the marketplace. To address this, we have revisited how we assess the types of security required for businesses loans, and are removing the £150k threshold for loans without asset security. Our credit team will now have more flexibility to assess the security required on a case by case basis.

First and foremost we always assess a business’s ability to repay a loan, and only accept those that pass our credit assessment. As part of lending to businesses, a small proportion may not be able to fully repay their loan which is why we take either a personal guarantee from the director(s) or some form of security, for all loans listed on the marketplace. This includes security on a specific asset (eg a coach), security across all assets in the business, or a charge on a business’ property.

Having guarantees or security in place puts us in a stronger position to recover funds for investors, should the business be unable to repay their loan in full. The type of security or guarantee available will continue to be shown clearly on the marketplace.

An example

A business might apply to Funding Circle for a loan of £170,000, pass our credit assessment and be able to afford their repayments. However, it may not have sufficient unencumbered tangible assets for us to secure the loan against, e.g. professionals including surveyors or medical practitioners, where the assets can be the directors themselves. Or if it does, then the process of registering a security, where a bank already has first charge, can sometimes be too cumbersome and expensive for the business to proceed.

In the past this type of business would not have been listed on the marketplace, even though we believe the business would be able to afford the repayments on the loan. By removing the threshold and assessing each individual loan on its own merit, we may be able to now take personal guarantees from the directors, and list the loan on the marketplace.

By assessing a loan’s security requirements on a case by case basis, we’ll be able to help even more creditworthy businesses to access finance they can afford, and put in place the appropriate security for their loan, for both the business and the investor involved.

If you have any questions about today’s news, please visit our FAQs or join us on our forum where we will be happy to discuss this in more detail.

The Funding Circle team

 

Queen’s Speech promises focus on access to finance. May industry news

George Osborne to force banks to promote alternative lenders

There was much speculation in May as to whether the Queen’s Speech would include more detail on whether the government are going to make banks refer small businesses to alternative finance providers. Although the speech was light on detail, it did mention a focus on access to finance as part of the Small Business Bill. More information on this proposed bill is due to be published next week and we also expect to see the government’s response to the consultation announced in the Budget very soon. The Evening Standard said the potential legislation “might actually make a real difference in tackling the problem of funding for small businesses”.

P2P Global Investment fund launches

Also in the news last month were details of a new fund set up to invest in peer-to-peer loans. This growing interest from bigger investors is a sign that the industry is maturing, and will mean that thousands more small businesses will be able to access finance. At Funding Circle, we believe there is a need for a diverse mix of investors in order to create a sustainable marketplace for the long term. This doesn’t mean our individual investors will become any less important to us over time and if you have any questions about this, then please don’t hesitate to get in touch. This story was also covered in The Times.

Bank lending to small business shrinks

May’s Funding for Lending figures showed yet another decline in bank lending to small businesses via this scheme. This was surprising given the refocusing of the scheme away from consumer lending and towards business lending at the end of 2013. A great opportunity for the alternative finance industry however, and this BBC article mentions www.alternativebusinessfunding.co.uk as a good place to start if you’re a small business looking for finance. James Meekings, one of our co-founders, was also on CNBC and Bloomberg responding to the figures.

We try harder

This Economist article discusses the rise of peer-to-peer lending. Whilst banks are often still sceptical, peer-to-peer lending firms believe that traditional means of finance are outdated with expensive branch networks and cumbersome technology.

Prosper marketplace announces $70 million investment round

Peer-to-peer lending continues to grow rapidly across the globe. In May, Prosper, a leading US peer-to-peer lender, announced they had completed a $70 million investment round to aid their growth. Exciting times for the entire industry.

Investor evening part 3: co-founder Q&A

Following on from part 1 and part 2 of our investor evening write up, we take a look at the points raised during the co-founder Q&A.

Q&A with Funding Circle co-founders

A lot of ground was covered with Samir and James, two of our co-founders, about the future of Funding Circle. Crucially, as we come towards the end of the whole loans trial, we discussed the need for a diverse mix of investors in order to create sustainable marketplace for the long term. The ambition for Funding Circle is to become like the London Stock Exchange for small business, where any investor, be they small or large, can lend to small British businesses.

James

This doesn’t mean our individual investors will become less important to us over time. If we look to the US market, regulation of the industry currently means we have more institutional investors but over time, we will work to ensure more individuals can lend. And vice versa in the UK market. Having this diversity will allow us to help thousands more businesses access finance, whilst ensuring investors continue to earn good returns.

Samir

Other key things to come out of the Q&A included:

Q: When will peer-to-peer lending be included within ISAs?

A: This was announced in the Budget earlier this year and consultation with Treasury is ongoing. We’re part of those conversations about exactly how it will work and when, and will update you as soon as we know more detail. In the meantime though, we expect the process to take about a year.

Q: The secondary market was less liquid at times earlier this year? Why was this and could we have more data on the performance of secondary market sales?

A: Just like any exchange, both the primary and secondary markets rely on supply and demand, and as we grow, we will need to ensure that one does not vastly outweigh the other at any one time. Record numbers of businesses came to Funding Circle at the beginning of the year and we saw 100+ loan requests listed a week, which led to a slow down for people looking to sell their loan parts. This has since improved and we will work hard to find a balance between the two. The aim is for both markets to be very liquid, which is why a diverse mix of investors – both individual and organisations – will be increasingly important, as business demand grows. We will also provide more data on secondary market fluctuations in the next couple of months.

Q: What does regulation mean for investors?

A: We actively campaigned for regulation for a number of years as we believe that as the industry grows, consumers must be protected. Specifically regulation means that peer-to-peer lending platforms will be required to have arrangements in place to continue to return available funds and administer existing loans in the event that the platform fails. All platforms will be required to hold capital reserves (extra cash) to help mitigate any business and financial risks, and every platform must have a complaints procedure in place (you’ll find ours in the FAQs).

The regulator has also issued guidelines on the information that a peer-to-peer lending platform should provide to investors. These include information on the average returns (after fees and bad debt but before tax) from the last few years, expected bad debt rates going forward, and information on whether a loan is secured, and if so, what form the security takes.

As part of our membership of the Peer-to-Peer Finance Association we already adhered many of these requirements and welcomed formal regulation.

Thank you!

We hope this has a useful overview of what was a very interactive and engaging session. We really enjoyed meeting more of you in person and found your feedback very useful. If you’ve got any further questions, then don’t hesitate to get in touch or join us on the forum, and we look forward to doing it again soon.

Meet the wider teams!

If you missed some of team interviews, then check out credit assessment, credit analytics and collections & recoveries. Tech and product interviews coming soon.

Highlights from our investor evening. Weekly Lending Review

Week 23: 2 – 8 June 2014

Last week we saw one of the largest loans come onto the marketplace; a loan for a rail business in Kent for £429,000, which is still available for bidding on. The south east was by far the most popular region for business loans, and the majority of loans were allocated to the B risk band.

New loans

There were 92 new business loans listed last week and there are currently 51 auctions on the marketplace.

The total value of the new listed loans was £5,781,660; that’s an average of £62,844 per loan. The largest loan value was £429,000 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 of gross yields. This calculation assumes you reinvest your interest each month and therefore includes the compound interest you earn. Number of loans and value of loans are reported weekly. The dates on the graph should be read as ‘week beginning’, for example: 2-Jun represents the week of 2nd – 8th June.

Weekly average gross yield (2 weeks rolling)

yield

Number of listed loans per week

number

Listed loan value per week

value

 

Update to minimum bid rates

We review the minimum bid rates in the middle of every month to decide whether they should be changed or kept the same. A number of factors are considered when reviewing the rates, including general economic conditions and costs of alternative borrowing products. This month, we have decided to increase rates by 0.1% on C risk band and 0.2% on the C- risk band. The new rates will take effect on Tuesday 1st July. The new minimum bid rates for loan requests listed after 9am on 1st July are as follows:

A+: 6% (no change)

A: 8% (no change)

B: 9% (no change)

C: 10.1% (+ 0.1%)

C-: 11.9% (+ 0.2%)

Our first investor evening

Thank you to all who attended our first investor evening held at the end of May. As promised, here’s the first installment of the write up. Stay tuned this week for the rest!

Recommend a friend and share £80

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

Community Discussions

This week we’re talking about the the £429,000 loan that’s on the marketplace.You can join the discussion on our community forum.

Loans defaulted last week

Vehicle products manufacturer. Loan ID 3243

This Keighley manufacturer has been trading since 2002 and is insolvent. The original loan amount was £100,000 and all 1,126 investors have been notified.

Our collections and recoveries team are working to recover the outstanding amounts for all of these loans.

Enjoy lending, The Funding Circle Team

* Terms & conditions apply.

Investment through Funding Circle involves lending to small and medium sized businesses, so your investment can go down as well as up. Remember, past returns are not necessarily a guide to future returns.

Investor evening part 2: collections and tech

Following on from part one of our investor evening write up, part two looks at themes discussed with both the collections & recoveries, and tech & product teams.

Collections & recoveries

Next up, Andrew Jackson, our Head of Collections & Recoveries, outlined the changes we’ve made to our processes since he joined the Funding Circle team about a year ago. Since then we’ve brought our entire debt collection and recoveries process in-house, which has allowed us to streamline our processes. This includes re-writing our documentation to be more effective,  and it also means that we’re not held back by the policies of a third party provider – thereby allowing us to act swiftly, robustly and within timescales that we consider fair.

AJ

Overall though, bringing everything in-house means we have a committed team of four professional working to deliver results for investors. This care and commitment is far more than any outsourced agency would provide. We know this is your money and we care very much.

By bringing debt collection in-house has led to our our ‘late rate’ recently reaching an all time low of 0.83% of our total living loan book – something we’re really proud of and will work hard to maintain and improve upon.

Key things to come out of the Q&A included:

Q: How do you strike the balance between recovering a debt and ensuring businesses are not asset stripped unnecessarily?

A: There is a huge trust element in the recoveries process. When a company director initially realises that they are unable to repay the loan, the first response is often fear. By turning this fear into trust, we improve the chances of Funding Circle investors being paid in full. Regular communication builds trust, and with transparency and responsiveness we can find fair and affordable solutions. We want to see as many businesses succeed as possible, because a successful business will deliver a full recovery.

Q: Do investors pay for expenses incurred during recovery?

A: At the moment the expenses and costs of court proceedings are not deducted from repayments by borrowers – they come out of the 1% servicing fee. There is currently a discretionary 15% administration fee for borrowers on late payments which can be used to offset the costs of court proceedings (if necessary). One expense that is borne by investors is the 16% fee which our former outsourced debt collectors used to charge on all recoveries. Clearly now that this is in-house those fees do not apply to most recoveries, but for historic cases those fees are still borne by the investors.

Tech & product

Steve, our Product Director, began by thanking all of you for your feedback via the surveys we regularly send out and the user experience sessions we run. Priorities you highlighted include: ensuring a good rate of return; managing default risk and improving recovery rate; and making the site easier to use.

Steve

In response to this feedback, we have extended the types of loans we offer to give investors more lending opportunities across various sectors such as property, to allow for well-diversified lending portfolios. The tech and product teams have also spent a lot of resource on creating data systems to support our credit models, new underwriting systems, and systems to bring recoveries in-house.

Andy, our Chief Technology Officer, discussed how we split our developer time between working on new functions and systems and cleaning up the site to make it easier to work on and more reliable by replacing old legacy code. We’re also in the process of introducing newer, faster servers which will improve site speed and responsiveness.

Andy

Key things to come out of the Q&A included:

Q: What are you doing about the security of the site and our accounts?

A: We are also going to be rolling out further security around investor fund transfers, including the addition of nominated bank accounts to receive transferred funds. We make use of two external agencies to undertake frequent site penetration testing, and to review and work with us on making sure that the code used is safe and secure. Further to this, we have an internal technology security team who work on maintaining and implementing code updates, as well as technology infrastructure security hardening.

Q: Is it possible to have access to more data around the performance of loans and how quick it is to sell loans?

A: We want to be the most transparent financial services company out there, and will always look to provide investors with as much data and transparency possible. As one example of this we have recently launched a new statistics page. Take a look here and let us know what you think.

Look out for…

tomorrow’s post which will include key points raised during the co-founder Q&A! As always, please get in touch with any comments or feedback.

A pleasure to meet you!

2014 has already seen a number of new developments at Funding Circle, including the introduction of regulation, the announcement of additional funding by the Government-backed British Business Bank and the start of our tailored property loans for businesses. With the number of investors fast approaching 30,000 we wanted to host an investor evening to meet more of you in person, and hear first-hand about your experience of investing through Funding Circle.

Last Thursday we had the pleasure of meeting about 30 of you at our first event for investors. It proved to be a great forum for debate and feedback, with many interesting and useful points raised – we hope those that attended agree, and many thanks to you for giving up your time to come and say hello.

We appreciate that not everyone is able to travel to London, so we filmed the event and will be publishing a video shortly. In the meantime though, we wanted to write up some of the key themes discussed in a three part blog series. This first post will take a look at some of the key points raised during the credit assessment and analytics session.

Credit assessment & analytics

Rahul, our Head of Credit Analytics, and Ari, our Head of Underwriting, kicked things off with a discussion on our credit assessment process and the risk models we build to help us determine which businesses to list on the marketplace.

Rahul

We discussed how these models ensure we remain within our estimated loss rate and why we’re constantly improving them so that only the most creditworthy businesses make it through to the credit assessment team. We also covered off our five-stage credit assessment process, and why ‘big data’ analytics, combined with a personal review of every application delivers superior credit performance.

Ari

Key things to come out of the Q&A included:

Q: How many pairs of eyes look at a single loan application?

A: Businesses go through a five stage credit assessment process at Funding Circle. Two of these are automated; the first is a credit model we have built and continue to improve following data from past performance of loans, and the fourth is a model which looks at whether the business meets the criteria for a Funding Circle loan. We manually assess stages 2, 3 and 5, and the sales, underwriting assistants, and underwriting teams respectively all work incredibly closely together to ensure that information is shared and assessed at each stage.

Q: Are you prepared for another economic downturn?

A: The answer to this is two fold. In terms of listing new loans on the marketplace, our risk bands are calibrated to target the expected annual loss rates that we publish on the site and this would not change in the event of a downturn. Loans that might have previously been listed as A+ would simply be listed as a B, for example, and loans that might have been listed as C- would be rejected.

In terms of our existing loan book, we take three factors into account when calculating the expected annual loss rate. The first is whether or not the business is expected to default. The second is the time at which the business defaults; for example a business which defaults after 1 repayment compared to a business who is unable to repay after 50 of 60 repayments will owe considerably more. The third factor is how much we expect to recover following the default. For both the second and third factors, we have taken a significant downturn into account and calculated the loss rate using stressed estimates.

Next week…

…we’ll be posting the second and third part of this series which will include key points discussed with collections & recoveries, and tech & product, as well as a Q&A with the co-founders.

Update to our whole loans trial. Weekly Lending Review

Week 22: 26 May – 1 June 2014

It was a very busy week at Funding Circle as we saw 58 business loans come onto the marketplace in four days, as well as hosting our very first investor evening at our office. Further details of the event will be on the blog later this week.

New loans

There were 58 new business loans listed last week and there are currently 52 auctions on the marketplace.

The total value of the new listed loans was £3,286,000; that’s an average of £56,655 per loan. The largest loan value was £250,000 and the smallest loan value was £5,000.

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 of gross yields. This calculation assumes you reinvest your interest each month and therefore includes the compound interest you earn. Number of loans and value of loans are reported weekly. The dates on the graph should be read as ‘week beginning’, for example: 26-May represents the week of 26th May – 1st June.

Weekly average gross yield (2 weeks rolling)

yield

Number of listed loans per week

number

Listed loan value per week

value

Update on whole loans trial

We are continuing with the trial for another few weeks, and we expect a full roll-out to all investors to take place within the next month.

Small changes to the Borrower T&Cs

We’ve made some changes to the ‘How to become a borrower’ section to reflect our current policies for business who apply for funding. Specifically, (i) amends to the wording to include property development and property investment businesses and (ii) in view of the growing marketplace and size of businesses applying for loans, we need greater flexibility surrounding County Court Judgements. If the overall assessment of the business allows, we will consider listing businesses which have in excess of £250 in CCJs.

Our first investor evening

Thank you to all who attended our first investor evening held at our London office. Later this week we’ll be posting a write up of the evening on our blog, so you can find out about how it all went.

Recommend a friend and share £80

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

Community Discussions

This week we’re talking about the Property development loan in Fulham that was on the marketplace last week. You can join the discussion on our community forum.

Loans defaulted last week

Vehicle repair centre. Loan ID 1143

This Milton Keynes business has been trading since 1996 and has entered into administration. The original loan amount was £50,000 and all 457 investors have been notified.

Our collections and recoveries team are working to recover the outstanding amounts for all of these loans.

Enjoy lending, The Funding Circle Team

 

* Terms & conditions apply.

Investment through Funding Circle involves lending to small and medium sized businesses, so your investment can go down as well as up. Remember, past returns are not necessarily a guide to future returns.

Update on whole loans trial

At the start of May we announced that we will be trialing whole loans at Funding Circle. The trial has been successful with approximately £1.3 million lent to UK businesses as whole loans.

As a result of this success, we are continuing with the trial for another few weeks and planning an official roll-out to all investors, which we anticipate will take place within the next month.

As we get closer to the official launch, we’ll provide further information to all investors and include details about how whole loans will be presented on the marketplace.

The Funding Circle team.