Top 4 questions (and answers) from our recent investor evening
In the second instalment of our July investor evening round-up, and following from the highlights video, we’re focusing on the questions that were asked during the event. We’ve picked our top 4 which are detailed below.
Our third and fourth instalments will be published soon, so watch out for these in your newsletters.
Q : When the third ISA launches in April 2016 will investors be able to transfer current lending into the new ISA wrapper?
A : Although the ISA has been announced and will open in April 2016, details of how it will work in practice are yet to be released. We are engaging with HMRC and will update you with further information as soon as we have news to share.
It has not been decided whether investors will be able to transfer existing loan parts into an ISA wrapper, but we believe that this is the most sensible approach. You can read more about what we’ve proposed to Government here.
Q : As new platforms enter the market, and more people start investing, what do you think is going to happen to the returns investors currently enjoy?
A : At an industry level we don’t think new entrants in the market is linked to pricing, or returns. The market as a whole is very big; in July 2015 Funding Circle investors lent £47.5 million to businesses, but we estimate there is between £7 to £10 billion lent to small businesses each month in the UK.
In terms of competition on the Funding Circle marketplace, there are certain things we do to make sure returns are attractive for investors. There are minimum bid rates in place for each risk band, which increase with expected bad debt rates, and we encourage investors to diversify their investment. Recent data published on our statistics page showed that everyone lending to 100+ businesses equally is earning positive returns, with approx. 90% earning more than 4%. Remember, by lending to businesses your capital is at risk.
Q : Will you offer other products?
A : Funding Circle’s vision is to help as many small businesses access finance as possible. We’re always looking to increase our product range, as having more products will mean we’re better able to service the needs of small businesses. Property finance for example, has been a very successful product; investors have lent £80 million to small businesses who develop or invest in property over the last 16 months, helping to build over 400 homes.
Q : What kind of backup procedures do you have in place?
A : We have a stringent disaster recovery plan in place, from a gas leak in the office to how we would handle a whole data centre going down, and we systematically run practice scenarios for employees to test our resilience. Our disaster recovery plan is in line with FCA regulations. We also run regular security penetration tests, where hackers try to break into our system. This allows us to continually review our security systems and fix any vulnerabilities.
Funding Circle has raised $273 million of equity capital, but in the unlikely event that we were to go out of business, all loan contracts would remain in place. You can read more about this here.
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