Picture story: Marvellous millinery, thanks to more than 2,000 investors

Husband and wife team, Alex and Zofia Torun-Shaw set up Laird Hatters in 2008, looking to offer an antidote to the usual homogeneous high street. Purveyors of stylish headwear, the couple sell an assortment of hats and caps, including brightly-coloured trilbies and caps in a range of tweeds from Lovat; Harris and Donegal.

There are now six Laird shops from Covent Garden to Cambridge, and a luxury store in the City. The couple pride themselves on each shop being an unstuffy, friendly place to buy quality and affordable headwear. Alex says ‘We have customers popping in for a chat and that tells us we’ve got it right.’

Laird Hatters has borrowed £140,000, across two business loans, from more than 2,000 Funding Circle investors to expand their range of handmade hats and caps. In June we met Alex and Zofia to find out how the loan has helped their business.

In this picture story below, Alex and Zofia discuss their experience of Funding Circle.

Laird new hat shop

Laird husband and wife

Laird traditional hat

Laird high street

Laird London College of Fashion

Laird stores

Laird two business loans

Laird thank you investors

Laird 2 years criteria

Do you need a business loan?

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Fixed interest rates have arrived for new loans | Weekly Lending Review

Week 39: 21 – 25 September 2015

From this week, all investors on the same loan will earn the same return as each other, following the introduction of fixed interest rates for all new loans.

This will make the lending process simpler and you can bid knowing your offer rate cannot be knocked out by other investors. The change won’t affect the loans parts you currently hold.

If you’re unsure about what this means for you, please contact us and we’ll be happy to help.

New loans available to you

There are currently 29 loan requests on the marketplace.

The total value of new loans listed on the Funding Circle marketplace was £14,328,200 averaging at £70,181 per loan. The largest loan value was £445,000 and the smallest loan value was £5,120. On 22 September you helped lend a record-breaking £4 million!

Loan parts available for you to buy:

Business loans available to bid on:

Weekly marketplace trends

These graphs show the most recent activity on the marketplace. The dates on the graph should be read as ‘week beginning’, for example: 21-Sept represents the week of 21st – 25th September 2015.

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 (The calculation is AGY = (1 + (two week rolling weighted average rate/12))^12 – 1). You can view the latest gross interest rates accepted on the marketplace on our statistics page.

Weekly average gross yield (2 weeks rolling)

Yield WLR 39

Number of loans, value of loans and amount lent are reported weekly.

Number of listed loans per week

Loans listed WLR 39

Listed loan value per week

Loan value WLR 39

Total amount lent

Amount lent WLR 39

Loan parts available to buy from other investors

Loan parts WLR 39

News you should know

If you’re an Autobid user…

We’ve made some adjustments to Autobid:

  • you can now select a maximum of 0.25% of your portfolio to be lent to one business to help you diversify
  • your Autobid will automatically bid on new loans requests in the risk bands you have selected, at the gross interest rates below:

Fixed rate card

  • Use the advanced settings to choose the rates to buy loan parts at.

You can read more about the Autobid upgrade on the blog and remember, your actual return may be higher or lower as your capital is at risk.

Updates to our terms and conditions

We’ve updated our T&Cs following the introduction of fixed interest rate loans. You’ll be required to re-accept the loan conditions next time you place a bid or buy a loan part. Read more about the updates on the blog.

Things we’re talking about

On the forum this week we’re on-hand to talk about the move to fixed rates. You can join the conversation here.

Loans defaulted last week

Haulage company. Loan 5177. Risk band C

This Cornish business was established in 2009 and has been placed in creditors voluntary liquidation.

Building services. Loan 11898. Risk band A

This Surrey business has been running since 2000 and was placed into liquidation on 21 August 2015.

Aluminium manufacturer. Loan 5986. Risk band B

This Dorset business was established in 2011 and has ceased to trade.

Law firm. Loan 4613. Risk band D

This Merseyside business has been running since 2009 and has struggled to maintain repayments.

Golf equipment wholesaler. Loan 11467. Risk band B

This Cheshire business was established in 2001 and is late with its repayments.

Our collections and recoveries team are working to recover the outstanding amounts for all of these loans and they will provide you with updates in the loan comments section on your summary page. Read how our collections and recoveries process works on our blog.

Enjoy lending, The Funding Circle Team

We’re introducing fixed interest rate loans today

At the start of September we announced plans to introduce fixed interest rates for all new loans, similar to how property loans have operated on the marketplace for 18 months. This is where Funding Circle sets the interest rate of the loan before it is listed on the marketplace. Rates are based on a number of factors including the risk band and term of the loan. 

We’re pleased to announce that the first fixed interest rate loans (other than property) will be listed on the marketplace today.

The new gross interest rates are listed below, before fees and estimated bad debts. These rates do not affect any of the loan parts you currently hold, they only apply to loan requests listed from 28th September 2015.

Please note these rates do not include property loans which will be set on a case by case basis. We’ll review these rates on a regular basis and notify you if they change.

Fixed rate card

Going forward you will see the interest rate available for each new loan request on the marketplace. Loans will continue to be listed for 7 or 14 days and during this time, you can choose whether to place a bid knowing your bid cannot be knocked out by other investors. 

If you use Autobid you will have received emails over the last 4 weeks regarding this update and your current settings. You can read more about updating your settings in our Autobid blog post here. If you’re unsure about what this means for you, please contact us and we’ll be happy to help. You can call us on 0800 840 4075, or send us an email.

 

 

We’re upgrading Autobid: here’s what you need to know

On Monday, 28th September we plan to release an upgraded Autobid. If you’re already using Autobid there’s nothing you need to do as it will continue lending for you. We’re just making some adjustments so it works with fixed interest rate loans.

How will Autobid work?

Autobid will bid at interest rates set by Funding Circle for all new loans listed on the marketplace. These rates are based on a number of factors including the risk band and term of the loan. Please see below for the gross interest rates which will take effect from Monday, 28th September. Your actual return may be higher or lower as your capital is at risk.

Fixed rate card

By using the advanced settings you can choose the risk bands you want to lend to and the interest rates you want to buy loan parts at on the secondary market.

What’s new?

Following investor feedback we’ve received, we are reducing the maximum amount you can lend to each business from 0.5% of your total portfolio, to 0.25%. This means Autobid can spread your money across even more businesses than ever before, so your investment should be more diversified.  

From Monday, you’ll be able to change this setting. Here’s what it will look like:

diversification

Using advanced settings?

With the new advanced settings shown below, you can choose the risk bands you want to lend to, ranging from A+ to E, view the estimated bad debt rates for each risk band, and choose your offer rate for buying loan parts on the secondary market.

autobid2

Quick tip: You’ll need to turn Autobid off to update your settings.

What does it mean for you?

If you’re using Autobid:

There’s nothing you need to do, as Autobid will continue lending for you. It will place bids on new loans and buy loan parts from other investors.

If you’re new to Autobid, follow these simple steps to turn it on:

1. Navigate to Autobid in your account

2. Select the maximum you want to lend to one business, as a percentage of your total funds. The lower you set this, the more diversified you will be which becomes important when a business is unable to repay their loan.

3. Click ‘Turn Autobid on’

If you only want to lend to certain risk bands, you can do this in the advanced settings:

1. Click Advanced settings

2. Check the risk bands you want to include

3. You can adjust your secondary offer rate here too, and view the estimated return after fees and bad debts

4. Click ‘Turn Autobid on’

If you have any questions about this, please get in touch with our customer relations team.

The Funding Circle team

Changes to the marketplace next week | Weekly Lending Review

Week 38: 14 – 18 September 2015

We’re introducing fixed interest rates for all new loans next week, meaning that investors on the same loan will earn the same return as each other, similar to how property loans work today.  

We plan to launch next monday, 28th September. Read more about what this means for you on our fixed interest rate webpage.

What will the new fixed interest rates be?

Typically rates will be  based on a range of factors including the risk band and the term of the loan.

Here are the new gross fixed interest rates (before fees and estimated bad debts):

Fixed rate card

Interest rates for property loans will be set on a case by case basis and will be clearly indicated on the individual loan request.

What happens if you use Autobid?

If you use Autobid there’s nothing you need to do as it will continue to lend to businesses on your behalf. It will lend at the interest rates stated above for new loans, and buy loans parts at rates you have saved in your current settings.

New loans available to you

There are currently 49 loan requests on the marketplace which are all available for you to lend to.

The total value of new loans listed on the Funding Circle marketplace was £13,402,940 averaging at £81,659 per loan. The largest loan value was £400,000 and the smallest loan value was £7,300.

Business loans still available to bid on:

Weekly marketplace trends

These graphs show the most recent activity on the marketplace. The dates on the graph should be read as ‘week beginning’, for example: 14-Sept represents the week of 14th – 18th September 2015.

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 (The calculation is AGY = (1 + (two week rolling weighted average rate/12))^12 – 1). You can view the latest gross interest rates accepted on the marketplace on our statistics page.

Weekly average gross yield (2 weeks rolling)
Yield WLR 38

Number of loans, value of loans and amount lent are reported weekly.

Number of listed loans per week

Loans listed WLR 38

Listed loan value per week

Loan value WLR 38

Total amount lent

Amount lent WLR 38

Loan parts available to buy from other investors

Loan parts WLR 38

News you should know

Investor evening

Last Thursday we had the pleasure of welcoming investors into our office to discuss the move to fixed interest rate loans. We filmed the event and will be publishing the video in the next week. Further information about the change can be found on the fixed rate webpage.

Updates to our terms and conditions

On Monday we’ll be changing our T&Cs following the introduction of fixed interest rate loans. You’ll be required to re-accept the loan conditions next time you place a bid or buy a loan part. Read more about the updates on the blog.

Loans defaulted last week

Commercial lighting manufacturer. Loan 10770. Risk band C

This Essex business was established in 2009 and went into administration on 10 August.

Language school. Loan 7290. Risk band C

This Cardiff business has been running since 2007 and has proposed a Company Voluntary Arrangement.

Flooring contractors. Loan 7943. Risk band C

This Bedfordshire business was established in 1997 and entered administration on 19 June.

Residential building contractors. Loan 13710. Risk band A

This London business has been running since 2010 and the guarantor is unresponsive.

Our collections and recoveries team are working to recover the outstanding amounts for all of these loans and they will provide you with updates in the loan comments section on your summary page. Read how our collections and recoveries process works (part one and part two) on our blog.

Enjoy lending, The Funding Circle Team

Updates to our T&Cs and Privacy Policy

Following our announcement of moving to fixed interest rates for all new loans, on Monday, 28th September we will be updating the terms & conditions for both investors and borrowers. We’re also taking this opportunity to update and simplify other clauses, set out below.

What you need to do

From next week, if you’re an investor you’ll be required to re-accept the loan conditions next time you place a bid or buy a loan part, as the updates below are included in the loan conditions.

If you’re a borrower, there’s nothing you need to do other than read the new conditions.

Investor T&Cs:

  • We’re changing the term ‘lender’ to ‘investor’ so the T&Cs are consistent with the website.
  • Clause 4 – we’re removing references to auctions and adding that all new loans will be listed at fixed interest rates.
  • Introduction paragraph 5 – we’re clarifying there is one borrower contract and how it works.
  • Clause 12.4 – the term novation is changing to assignment as it better describes the way in which the transfer works, on default of a loan or sale of loan part on the secondary market.  Investors will now assign their rights to another investor or to a Funding Circle company on default of a loan, and the loan conditions provide that the new investor becomes party to the loan and takes on any obligations of the transferring investor. This has no impact on you but helps with certain regulatory analyses.
  • Clause 12.4 – we are removing the option to, and the 7 day window for, opting-out of the collections process. This means our collections team will be able to start the process faster than before, and work to recover the debt outstanding on your behalf. The opt-out provision was originally included within the terms when the collections process was outsourced, and has been used twice by investors out of a total of approx. 400 loans which have defaulted since 2010. Since bringing this function in house, where we have a dedicated team of specialists working to make recoveries on your behalf, the recoveries estimates have greatly improved: the current actual recovery estimated is 19.3p in the £, in comparison to 9.2p before, and across all loans the estimated recovery within 5 years of default is 40p in the £.

Borrower T&Cs

  • Changes to clause 3 to reflect the move to fixed interest rates for all new loans, where Funding Circle sets the interest rate of a loan before it’s listed on the marketplace.
  • Changes to paragraph 4 of the introduction and clause 3.12 to clarify how the borrower contract works.
  • Change to clause 1.5 – to add a borrower warranty and representation that it does not expect the information provided to change in any material way in the next 6 months, and an undertaking to update us if any information is likely to materially change.
  • Clarification in clause 4.3 that the interest rate stated in Key Contract Terms will not change.
  • Clause 8.4 – changes to clarify that a loan is assigned rather than novated.
  • Change to clause 8.7 to reflect that if we agree a payment plan, we can verify whether you can afford this by requesting information and doing credit checks.
  • Clause 9.2(b) – clarification that we can terminate membership if there is a breach of any security document, a facility letter in connection with property loans or any other documents arising out of the loan made on the platform

Updating our privacy policy

We are also taking this opportunity to simplify our privacy policy. The new policy is shorter, easier to understand and it better explains certain practices (including in relation to when we undertake credit reference checks and how you can contact us). There are no fundamental changes to how we collect and use personal data, we’re just simplifying our documentation.

If you have any questions about the above, please don’t hesitate to contact us and we’ll be happy to help.

Enjoy lending,

The Funding Circle team

Using Autobid? | Weekly Lending Review

Week 37: 7- 11 September 2015

Last week more than £9 million made its way to businesses across the UK, thanks to your lending. Of the new loans listed on the marketplace last week, London and the South-East were the most popular business locations.

News you should know: moving to fixed interest rates

Over the next few weeks there will be changes to how the marketplace operates, and to the way Autobid works.

Using Autobid?

Autobid will automatically lend at the new fixed interest rates for all new loans listed on the marketplace, and the interest rates you currently have saved in your Autobid settings will only apply for buying loan parts on the secondary market.

For more information about this please see our fixed rate page, or give our customer relations team a call on 0800 840 4075.

Site downtime this weekend

The site will be unavailable for approximately 12 hours overnight this Saturday, starting at 7pm. Everything should be up and running again by 7am Sunday.

New loans available to you

There are currently 49 loan requests on the marketplace which are all available for you to lend to.

The total value of new loans listed on the Funding Circle marketplace was £12,560,020, averaging at £80,000 per loan. The largest loan value was £400,000 and the smallest loan value was £5,000.

Business loans still available to bid on:

Weekly marketplace trends

These graphs show the most recent activity on the marketplace. The dates on the graph should be read as ‘week beginning’, for example: 7-Sept represents the week of 7th – 11th September 2015.

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 (The calculation is AGY = (1 + (two week rolling weighted average rate/12))^12 – 1). You can view the latest gross interest rates accepted on the marketplace on our statistics page.

Weekly average gross yield (2 weeks rolling)

yield

Number of loans, value of loans and amount lent are reported weekly.

Number of listed loans per week

number

Listed loan value per week

value

Total amount lent
whole loan

Loan parts available to buy from other investors
secondary

Loans defaulted last week

Retailer. Loans 2027, 3869, 7381. Risk band B

This fruit and vegetable retailer was established more than 20 years ago and entered administration in August.

Vehicle retailer. Loan 6910. Risk band A

This Warwickshire business has been running since 1995 and has entered liquidation.

Digital media company. Loan 1913. Risk band C

This Manchester business has been running since 2008 and has entered liquidation.

Retailer. Loans 1399, 4683, 6670. Risk band A+.

This London business was established in 2000 and has entered administration.

Our collections and recoveries team are working to recover the outstanding amounts for all of these loans and they will provide you with updates in the loan comments section on your summary page. Read how our collections and recoveries process works (part one and part two) on our blog.

 

The Funding Circle Team

 

Your fixed rate questions answered

Following feedback from investors over the last few days we have put together a list of the most frequent questions and answers that have been raised. If you would like to join the investor evening on 17th September or webinars that are taking place over the next few weeks, please contact us at community@fundingcircle.com.

Information on the marketplace

When will fixed interest rate loans launch?

Fixed interest rate loans will launch the week commencing 28 September.

With the introduction of fixed interest rate loans, will I still be able to review a business’s details on the marketplace, or will Autobid, or investors running automated scripts, fill up the loan immediately?

Funding Circle was built so investors could have the opportunity to review individual businesses and decide if they want to lend to them based on their own preferences. We are committed that investors will still have time to review individual loan applications as we grow. Autobid has a 65% cap on all new loan requests it can fill. 35% of all new loans will be available to manual bidders.

We are aware of certain investors using automated scripts. We continue to monitor the marketplace and if we feel any individual investor is disrupting the marketplace we will take action.

Can interest rates be changed mid-term?

Once a business accepts their loan request the interest rate is fixed for the term of the loan. This is how loans have always operated at Funding Circle and will not change with the introduction of fixed rates. All loans already in your portfolio will remain at the same rate for the full term. Repayments will operate in the same way they have previously. For all loans, except certain property loans (those marked as ‘interest only’), investors will receive capital and interest repayments on a monthly basis.

Changes to fixed interest rates

Do rates include a provision for a potential interest rate move in years to come?

As part of setting the new fixed interest rates, we take into account forward looking expectations of interest rates over the next five years. This is why you will see the longer term loans are higher rates.

The fixed rates you have published are below the average rates seen over the last 100 loans.  Why is this?

August is typically a month where interest rates increase due to the holiday season. This is a seasonal trend. We have published below the average rates from the start of 2014 and 2015, (excluding property) and you can see that the fixed rates for 24-36 and 48-60 month loans are comparable with the new fixed interest rate loans. The majority of investors will achieve more attractive gross interest rates under the new model.

Fixed rate table

 

Why are 6-12 month A+ loans only 6% fixed interest rate?

6-12 month A+ loans make up a very small proportion of our overall loanbook (about 1% of all loans) and we haven’t yet seen any defaults to date for this group. Short term loans are typically very competitive in the market and the rate is what feel it should be to attract these types of borrowers.

What happens when ISAs become available. Won’t the rates will be driven lower because of higher demand?

Typically the majority of ISA money is deposited over a short period towards the end of the tax year. With an auction model this volume of money would have depressed rates over that period given the influx of capital. This will not be the case with fixed interest rate loans.

Why not offer both models, fixed rate and auctions, and allow investors and borrowers to choose their preferred method?

Businesses are looking for low cost finance which is quick to access. They will only accept a loan auction if the rates are lower than the fixed rate for their risk band. Therefore we believe that rejections would increase under an optional auction/fixed rate model.

Why are you taking away all of the fun and turning into a bank?

We passionately believe in investors being able to lend their money directly to businesses in the UK. This is what makes Funding Circle very different from a bank. We are committed that investors will still have time to review individual loan applications as we grow.

Were investors consulted on this before? Why won’t you launch as a pilot first?

We try to engage with investors as much as possible and listen to feedback. Where we feel suggestions are practical and can help improve Funding Circle we try and implement these. Unfortunately there will be times when significant business decisions are made that will not be communicated to investors before the decision is taken. We have monitored fixed rate loans at our US business and our property loans, and we believe they will be successful here in the UK.

Time investor money tied up

Will fixed interest rates mean borrowers accept their loans quicker?

The current average time it takes for a loan request to be accepted is approximately 7 days. We expect it will be faster with the introduction of fixed rates. All fixed interest rate loans will be listed for 7-14 days or until the borrower chooses to accept the loan. In the longer term we will be looking to implement a system where borrowers can pre-accept their loan and are automatically removed from the marketplace when their loan is 100% funded. As a result of the move to fixed rate we expect rejection rates will drop as borrowers have a certainty of price, which will help investor money to be used more efficiently.

Property

I like property lending. What plans and/or changes do FC have for property loans?

There are no plans to change how property lending operates on the marketplace.  

Borrower related questions

Won’t borrowers just refinance when loans rates have dropped?

Borrowers can already do this today when rates fall at times in the year, but we don’t see this as an attractive option because of the additional fee the business would incur.

Autobid questions

When will Autobid start buying discounted loan parts?

This change will be made tomorrow and Autobid will start purchasing discounted loan parts immediately.

I use autobid.  Do I have to do anything in the context of the new system?

If you use Autobid to lend to businesses then you may wish to update your settings when fixed interest rates launch.

Going forward:

  • Autobid will lend on all loans within risk bands you have selected. The gross interest rates stated above will apply for the majority of new loans, excluding property, where rates may vary.
  • Your current Autobid settings will remain in place for buying loan parts from other investors on the secondary market.

‘The disruption of financial services has only just begun’ | Weekly Lending Review

Week 36: 31 August – 4 September 2015

Included in this month’s industry news, Funding Circle CEO Samir Desai discusses how disruptive new technology companies are transforming business in Europe and borrower Jenny Brown explains in The Sunday Times how marketplace lending helped her business, Pampeano, grow. Read our round-up on the blog.

Important Funding Circle update

We’ve been looking at ways to improve our marketplace for borrowers and investors and have decided to introduce fixed interest rates for all new loans, within the next month. Last week, we sent a letter and Q&A to all active Funding Circle investors announcing the change. Read more about what this means for you on the fixed interest rate webpage.

New loans available to you

There are currently 37 loan requests on the marketplace which are all available for you to lend to.

The total value of new loans listed on the Funding Circle marketplace was £9,417,040 averaging at £80,499 per loan. The largest loan value was £390,000 and the smallest loan value was £5,120.

Business loans still available to bid on:

Weekly marketplace trends

These graphs show the most recent activity on the marketplace. The dates on the graph should be read as ‘week beginning’, for example: 31-Aug represents the week of 31st August – 4th September 2015.

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 (The calculation is AGY = (1 + (two week rolling weighted average rate/12))^12 – 1). You can view the latest gross interest rates accepted on the marketplace on our statistics page.

Weekly average gross yield (2 weeks rolling)

WLR 36 yield
Number of loans, value of loans and amount lent are reported weekly.

 

Number of listed loans per week

WLR 36 loans listed

Listed loan value per week

WLR 36 loan value

Total amount lent

WLR 36 amount lent

Loan parts available to buy from other investors

WLR 36 loan parts

News you should know

Updates to Autobid

Autobid will now buy loan parts which have a discount applied, as well as those listed at par value. In addition, we’re also increasing the maximum discount you can apply to 20% of the outstanding principal. These changes have been reflected in clauses 4.6 and 7.3 of the investor T&Cs.

Loans defaulted last week

Food wholesaler. Loan 11236. Risk band D

This Bury business was established in 2012 and the borrower has become unresponsive.

Pub. Loan 8973. Risk band C

This Essex business has been running since 2012 and will be served with a statutory demand.

Lighting manufacturer. Loan 6939. Risk band B

This Cornwall business was established in 2009 and has been placed into administration.

Utility engineers. Loan 6937. Risk band A+

This Hertfordshire business has been running since 1998 and the guarantors intend to enter into individual voluntary arrangements.

Our collections and recoveries team are working to recover the outstanding amounts for all of these loans and they will provide you with updates in the loan comments section on your summary page. Read how our collections and recoveries process works (part one and part two) on our blog.

Enjoy lending, The Funding Circle Team

 

A revolution in small business lending. August industry news

Newspapers - Copy

Bye, banks. We prefer peer-to-peer lending

This month, one of our borrowers Jenny Brown, was featured in this great article about her experience of getting a business loan for her company, Pampeano. She discusses her experience with banks versus her experience with marketplace lending. With sophisticated technology, online platforms are able to assess the credit risk of a business and help investors to deliver cash much faster than a bank. Last year, around £1.6 billion of loans were granted by these platforms and this figure is set to almost double this year. Another borrower of ours, The Stripes Company, was also highlighted in an article published in the Daily Mail.

Zopa reaches £1 billion lending milestone

A massive congrats to Zopa on their huge milestone; the platform has now facilitated its billionth pound in consumer loans. For the past five years, Zopa’s loanbook has grown between 70 and 100 percent a year and is on track to increase even more. This substantial growth is seen across the sector as more investors and borrowers look to marketplace lending for business and consumer loans.

Disruptive new tech companies are transforming business in Europe

Prevailing attitudes about Europe being able to produce successful global companies are beginning to change, as Britain continues to build a powerful fintech sector. In the second quarter of this year alone, nearly €3.5 billion has been raised by European tech firms. In this article bylined by our CEO, Samir Desai, he discusses the importance of embracing this innovation.

Funding Circle Wants To Start A Revolution In Small Business Lending

Last month, Funding Circle US, along with five other marketplace lending platforms in the US, helped lead the charge to launch a Small Business Bill of Rights. Sam Hodges, our US Managing Director, talks about the importance of a Bill of Rights in order to protect small businesses and promote transparency in the sector. The six key rights can be found here, and there was further coverage in Forbes and Reuters.

Banks should be afraid, the disruption of financial services has only just begun

Simon Champ, CEO of P2PGI – a large marketplace investor, discusses how disruption in financial services has not yet reached the same levels as sectors such as e-commerce and travel. Marketplace lending platforms are beginning to change that as we continue to see immense growth within these tech firms. It’s only a matter of time before we see marketplace lending become the accepted way for people or businesses to grow money – the disruption of financial services has only just begun.

Funding Circle is set to do over £35 million in revenue this year — and it hasn’t spent any of the £97 million it raised

And last but certainly not least, on the 26th August Funding Circle celebrated it’s 5th birthday! Investors are now lending more than $100 million a month via our platform across the UK and the US, helping hundreds of small businesses access business finance, so thank you to all our customers for your continued support. To read more about what we’re up to at the moment, check out our blog. Any questions? Please get in touch.

News

Fixed interest rate loans – important Funding Circle update

As you may already be aware, we sent a letter and Q&A to all active Funding Circle investors today announcing that we will be moving to fixed interest rate loans within the next month.

Below is the letter and you can read more about these changes on our fixed interest rate webpage. To download a more detailed Q&A about the changes, please click here.

We appreciate this is a big change but we believe it is a necessary step towards building the most successful marketplace for our customers. We would be grateful for your feedback to help us in the next stage of our journey.

The Funding Circle team

……

Fixed rate letter from Samir Desai, CEO and co-founder of Funding Circle

Since we first launched Funding Circle our goal has been to enable investors to earn attractive, stable returns and to help small businesses access finance quickly at a fair, transparent price.

Recently, we have been reviewing in detail how Funding Circle operates, with a view to providing an improved service for both investors and borrowers. We have found that the current auction model has significant drawbacks, which we believe can be improved to give investors and borrowers a better experience, and ensure the long term sustainability of the marketplace.

After careful consideration we have taken the decision to move to fixed interest rates for all loans within the next month. I appreciate this is a big change, which is why I wanted to write to you today.

What’s the challenge with the auction model?

The auction model has existed since Funding Circle first launched in 2010 – enabling investors to choose the interest rate they wish to earn and the amount of money they wish to lend.

Whilst I know many investors have enjoyed the auction model, there are a number of disadvantages with it:

  • Auctions tie-up investors’ funds: auctions typically last 7 or 14 days. During this time your money is not earning any interest and your bid may be knocked out by a lower rate. This means that investors may bid multiple times during an auction, with no guarantee their bid will be successful.
  • Confusing and complex to understand: many investors tell us they want a simple, easy way to lend their money. Auctions can be confusing and unattractive, especially for new investors.
  • Unattractive to borrowers: many business owners are put off by the lack of certainty around the cost of their loan.

How do fixed interest rate loans work?

Fixed interest rate loans are where Funding Circle sets the rate based on the risk of the loan and all investors achieve the same interest rate. We already operate fixed interest rates for property and asset finance loans.

The interest rate is based according to the risk of the loan, rather than the availability of investor funds. The rate is set before a business is listed and it is published on the marketplace for all investors to see. Rates will be set according to the risk band and the length of the business loan.

By setting the interest rate before a loan is listed on the marketplace, there is no need for the traditional auction. Loans will fund and be accepted by businesses more quickly, meaning your money is working harder for you.

Benefits of fixed interest rate loans

  • Simpler and easier to understand: if you like a business you can bid knowing your offer rate cannot be knocked out by other investors.
  • Your money works harder for you: by giving borrowers certainty of rate we expect businesses to accept their loans faster than they currently do, meaning your money is used more efficiently.
  • More businesses to lend to: certainty of cost means more businesses will apply to Funding Circle, creating more lending opportunities for you.

How will this change affect me?

We believe this move is in the best long-term interest for the Funding Circle marketplace. For the majority of investors, fixed interest rate loans will deliver a better service and higher returns. From our analysis, if the new fixed interest rates had been introduced at the start of last year, 71% of investors would be earning a higher expected return. To help plan for the launch of fixed interest rates, we are releasing the new rates to all investors today. You can see these on the Q&A page attached with this letter.

We have taken this decision in the interests of the majority of our investors and the feedback we have received has been positive. 90% of you have previously told us that you would increase or maintain your investment through Funding Circle if more fixed interest rate loans were introduced.

We recognise, however, there are a group of investors who actively use the auction model to earn above average returns, and who will be unhappy with this news and whose overall return is likely to drop as a result. We hope those affected will still consider that they can earn an attractive return at Funding Circle and continue to lend through the platform.

How can I provide feedback?

This is a significant change to how Funding Circle operates. We want to be open with all investors and provide the opportunity to ask questions before we make this change.

Below are details about how you can be involved in the process:

  • Investor evening: this will be held on 17 September and primarily focused on questions about fixed interest rate loans.
  • Webinars: we will be hosting regular webinars to answer your questions. We will provide further information about these on the blog, forum and in your weekly email newsletter.
  • Written feedback: investors can provide written feedback, found at our fixed interest rate webpage.

If you would like to join any part of this process, please email us at community@fundingcircle.com.

This is a big, but necessary, move to continue to build Funding Circle into a successful, mainstream business. I hope this letter provides you with further information behind this important change and we look forward to answering any questions you have.

Yours sincerely,

Samir Desai

CEO and co-founder, Funding Circle

News

Funding Circle turns 5! | Weekly Lending Review

Week 35: 24 – 28 August 2015

In August 2010, the Funding Circle marketplace was launched by three university friends, Samir Desai, James Meekings and Andrew Mullinger. £50,000 was lent to small businesses in the UK during the first month.

Fast forward five years, and approximately £65 million, or $100 million, is being lent to small businesses in the UK and the US every month. We’ve come a long way in the past five years, and it’s all thanks to your lending and continued support! Read some of our highlights on the blog.

New loans available to you

There are currently 44 loan requests on the marketplace which are all available for you to lend to.

As part of lending to businesses, some may be unable to fully repay their loans, which is why lending small amounts to lots of businesses is so important. In this short video you’ll learn the basics of diversification and find out how to diversify at Funding Circle.

The total value of new loans listed on the Funding Circle marketplace was £13,342,840 averaging at £84,160 per loan. The largest loan value was £370,000 and the smallest loan value was £5,000.

Business loans still available to bid on:

Weekly marketplace trends

These graphs show the most recent activity on the marketplace. The dates on the graph should be read as ‘week beginning’, for example: 24-Aug represents the week of 24th – 28th August 2015.

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 (The calculation is AGY = (1 + (two week rolling weighted average rate/12))^12 – 1). You can view the latest gross interest rates accepted on the marketplace on our statistics page.

Weekly average gross yield (2 weeks rolling)

Yield

Number of loans, value of loans and amount lent are reported weekly.

Number of listed loans per week

Loans listed

Listed loan value per week

Loan value

Total amount lent

Amount lent

Loan parts available to buy from other investors

Loan parts

Loans defaulted last week

Civil engineers. Loan 2137. Risk band C

This Cheshire business was established in 2002 and is being placed in compulsory liquidation.

Magazine publisher. Loan 3523. Risk band C

This Shetland business was established in 2007 and the borrower has proposed a payment plan.

Digital marketing agency. Loan 5180. Risk band B

This Devon business has been running since 2005 and has been placed into liquidation.

Garden machinery supplier. Loan 9394. Risk band A

This Gloucestershire business was established in 2009 and is entering Creditors’ Voluntary Liquidation.

Mobile advisers. Loan 11419. Risk band B

This West Sussex business has been running since 2009 and has been placed into liquidation.

Our collections and recoveries team are working to recover the outstanding amounts for all of these loans and they will provide you with updates in the loan comments section on your summary page. Read how our collections and recoveries process works on our blog.

Enjoy lending, The Funding Circle Team