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.
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.
The Funding Circle team