Funding Circle update on the EU Referendum | Weekly Lending Review

Week 25: 20 – 24 June

As you know, last week the UK voted to leave the European Union and we wanted to reassure you about your investment at Funding Circle. There are currently no planned changes to Funding Circle’s day to day operations and the way you lend to small businesses through the marketplace. You can read more in the Funding Circle update on the EU Referendum.

New loans available to you

There are currently 28 loan requests on the marketplace, and thousands of loan parts available for you to buy which will help you become diversified.

The total value of new loans listed on the Funding Circle marketplace was £8,307,660 averaging at £69,994.42 per loan. The largest loan value was £440,480 and the smallest loan value was £5,000.

Business loans available to bid on:

 

Gross interest rates are before fees and estimated bad debts. Your actual return may be higher or lower as by lending to businesses, your capital is at risk.

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 (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 25 yield

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

Number of listed loans per week

WLR 25 loans listed

Listed loan value per week

WLR 25 loan value

Total amount lent

WLR 25 amount lent

Loan parts available to buy from other investors

WLR 25 loan parts

News you should know

Get fit with Funding Circle: 5 ideas to get you started

Pimms on the patio, canapés on the common, sorbet in the sun… Whatever your tipple this summer, keep active with our list of 5 tip-top Funding Circle businesses.

Loans defaulted last week

Painter. Loan 4638. Risk band B

This Gloucestershire business was established in 1999 and is in the process of proposing a Company Voluntary Arrangement.

Accountant. Loan 9427. Risk band A

This East Sussex business has been running since 2000 and was placed into administration in May 2016.

Transport business. Loan 5822. Risk band C

This Staffordshire business was established in 2009 and was placed into liquidation in May 2016.

Professional services agency. Loan 10016. Risk band A+

This London business has been running since 2000 and has breached their loan contract.

Chocolate making studio. Loan 12809. Risk band C

This Lancashire business was established in 2011 and has ceased trading.

Adult education business. Loan 9740. Risk band D

This Warwickshire business has been running since 2005 and was placed into liquidation in June 2016.

Fast food franchise. Loan 2738. Risk band C

This Bedfordshire business was established in 2007 and a petition was registered against the borrower in January 2016.

Training provider. Loan 10024. Risk band A

This Nottinghamshire business has been running since 2000 and was placed into administration in May 2016.

Blind manufacturer. Loan 7088. Risk band C

This Lincolnshire business was established in 2009 and was placed into liquidation in May 2016.

Video production company. Loan 185119. Risk band B

This Glasgow business has been running since 2000 and has proposed a Debt Arrangement Scheme.

Tea & coffee merchant. Loan 16949. Risk band C

This Buckinghamshire business was established in 2005 and was placed into liquidation in March 2016.

Restaurant. Loan 18264. Risk band D

This Yorkshire business has been running since 2010 and is 3 months in arrears.

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

 

Funding Circle update on the EU Referendum

As you know, the UK have voted to leave the European Union and we wanted to reassure you about your investment at Funding Circle.

The process of leaving the European Union will take approximately two years. There will therefore be no initial change to Funding Circle’s day to day operations and the way you lend to small businesses through the marketplace.

Funding Circle is in a very strong position; we have built a long term business to last. We have raised approximately $300 million for our own business use, which means we can trade through uncertainty. We have a diverse range of investors lending through the marketplace to UK small businesses, including more than 50,000 people, financial institutions, the Funding Circle SME Income Fund which raised £150 million on the London Stock Exchange and the Government-backed British Business Bank. This diversity ensures the marketplace is sustainable and able to weather an economic shock.

The businesses you lend to are resilient – many of our borrowers do not trade with the European Union and are unlikely to be directly affected. Our small business customers are on average ten years old, and have traded through economic volatility before.

There may be some economic and political uncertainty over the short term and we will react accordingly, including factoring this into our credit assessment process and continuing to conduct rigorous stress tests on our loanbook.

If you have any questions please email us at contactus@fundingcircle.com.

The Funding Circle Team

How does Funding Circle assess loans?

At Funding Circle we take credit assessment very seriously and have strong processes in place to assess businesses before they are listed on the marketplace. We recently sat down with Jerome Le Luel, Chief Risk Officer for Funding Circle, to talk about how our processes work.

Transcript:

Q: Hi Jerome. Thank you for agreeing to speak with us. To start with, could you tell us a bit about your role at Funding Circle and your background before joining us?

A: Hi, I’m Jerome Le Luel. I’m the Chief Risk Officer for Funding Circle. In the last seven years I’ve worked with Barclays in the UK, where I was in charge of risk management for Barclaycard and I was also in another job at Barclays, in charge of risk analytics for the entire bank.

Q: Could you give us a brief overview of how we assess loans at Funding Circle?  

A: To assess loans at Funding Circle we go through a very thorough process which combines several tools. Firstly, we are applying some straight rules to exclude any business that would not fit our risk appetite.

Secondly, we are using statistical models to predict which of those businesses passing our lending criteria are actually the ones we want to lend to given the profile of the business, the industry, the loan amount they want, the strengths of their financials, the credit history of the business but also its directors.

And finally, we also leverage the expertise of a great team of experienced credit assessors – people who have worked in the industry for many years. They look at every application individually and they overlay their judgement. They have the authority to right-size the loans based on affordability and to exclude loans that might not fit the criteria when we go into this kind of refined assessment.

So it’s very much a 360 picture of every business that we look at, and using different lenses to make sure we’re not missing anything.

Q: Is there someone looking over each application?

A: Each application is looked at by one of our staff members. We believe that we can’t make good credit decisions by just relying on scores and statistics – our trained staff are also involved in reviewing every application, making sure that all the materials are genuine, but also interpreting the financials, the demand of the loan size, and making sure it is commensurate to the business needs. So applying this human judgement is very important to complement the model of scoring that is part of the decision.

Q: In terms of the loan book, how has Funding Circle performed over time?  

A: The credit performance of the Funding Circle loan book in the UK has been very stable over time. Over the last four years the performance has been very strong. Typically, credit losses on an annual basis have always been below 2% which is better than the average of the UK market.

Over time, we have actually expanded our risk appetite, we’ve introduced new risk bands, but we’ve done that at a point in time where we knew we could control it. So the average risk of the book has remained less than 2% even though our acceptance rate has gone up.

Q: Moving forward, how do we continue to make improvements to the way we assess businesses?

A: At Funding Circle, we believe that being the best at assessing credit risk is going to be a key competitive advantage to win the interest of our investors. We need to deliver a very stable risk performance, and we need to make sure we are extremely precise in our decisions. So one thing we keep pushing all the time is to refine our models and leveraging data that is available.

When we introduce changes to the risk process we also calibrate those changes using recent performance to make sure that those changes are not going to distort the performance barriers.

Q: How do we help more small businesses access finance, while continuing to protect investors’ interests?

A: We don’t need to loosen our credit appetite to attract more business; it’s more a matter of demonstrating that the service is superior and letting people know that it’s available through proper brand advertising.

Q: Finally, how prepared are we for market downturn? Has our loan book been stress-tested at all to see what would happen in the case of a recession?

A: We need to understand the volatility we can expect. For that, we put the book through analytical stress testing. We simulate what the book would do in a downturn to understand how much credit losses would increase by. What it’s shown is that in an extreme downturn scenario, the credit losses would increase by around 50-60%.

The second thing we do is we make sure that the loans are priced so that in the eventuality of this fluctuation, on average investors would not lose principle in their investment. And if you think about the book we have in the UK, on average we deliver a net yield of around 7% and the loss rate is less than 2%. So if you apply very simple maths of this 2% increasing by 50% it becomes a 3%, and that 7% yield would become a 6%. So that gives us comfort that there is a buffer in the system to navigate through a recession.

Enjoy lending,

The Funding Circle team

Get fit this summer: here are 5 ideas to get you started

Tennis

Pimms on the patio, canapés on the common, sorbet in the sun… Whatever your tipple this summer, keep active with our list of 5 tip-top Funding Circle businesses.

It’s officially summer! Wimbledon kicks off next week and Andy Murray’s already started the season with a bang, becoming the first man to win the The Queen’s Club title five times.

Still in need of motivation? The world’s most successful business leaders share their secrets to staying in shape, even when they’re busy running a business. It can be tricky finding time in your day to exercise, so the list below features businesses who focus on keeping people active and healthy.

Yoga

1. Looking for some Zen in your life? Bikram Yoga Leicester, who opened a new studio with their £20,000 Funding Circle loan, offer a wide range of yoga classes, retreats and therapies that are suitable for people of any ability. The company specialise in hot yoga — which is said to improve the circulation of oxygen and nutrients in the body. Or you could try The Yoga Space in Leeds, who used their loan to buy a minibus for transportation to and from their studio. Whether you’re an expert or a beginner, yoga can be an amazing way to keep your body and mind healthy.

2. If you’ve been dreaming of a golf weekend away, Sherdons Golf Centre could be the place for you. The family-run business were able to exercise their long-term marketing plan for their business after borrowing £40,000 from 470 investors. The company is located in the beautiful Gloucestershire countryside and welcomes golfers of all abilities. They have a 9 hole course as well as a clubhouse with banqueting and bar facilities – a great way to finish a long day on the course.

Paddle

3. Lagoon Watersports  offer wakeboarding off the beautiful Brighton coast. The company, who purchased a new wakeboarding cable system with their Funding Circle loan, are experts in water sports. The friendly team offer training for all ages from sailing, paddle boarding and windsurfing in beautiful Brighton and Hove. Take a look at their website for inspiration!

4. Have you always wanted to learn martial arts? KitFit Academy were able to refurbish their new premises after securing a loan of £100,000 in September 2015. The company offer a variety of programmes from kickboxing to karate, suitable for all ages and fitness levels. They specialise in working with children to help them become more focused and confident while educating them on the importance of fitness.

5. And finally, if you’re a thrill seeker and love outdoor sports, Pure Outdoor have some excellent trip ideas. The company, who borrowed £8,000 in order to help purchase a new office for their business, are located in the heart of the Peak District National Park. The strong and experienced team provide UK and overseas courses and activities such as rock climbing, caving, first aid and mountain guiding. A terrific way to keep your year 2016 fresh and exciting!

What would you do with extra finance this summer? We’ve helped more than 16,000 businesses in UK, US, and Europe access finance for a whole range of needs. Apply online in just 10 minutes and you’ll get a decision within 2 working days.

You can also earn great returns whilst also supporting small UK businesses. Create an account online and start lending the same day. Remember, by lending to businesses your capital is at risk.

Enjoy lending,

The Funding Circle team

£100 million boost to UK businesses | Weekly Lending Review

Week 24: 13 – 17 June

Find out how you can earn attractive returns and save for retirement with Funding Circle in May’s industry news. Remember, by lending to businesses, your capital is at risk.

New loans available to you

There are currently 14 loan requests on the marketplace, and thousands of loan parts available for you to buy which will help you become diversified.

The total value of new loans listed on the Funding Circle marketplace was £8,661,800 averaging at £85,116.77 per loan. The largest loan value was £419,320 and the smallest loan value was £5,220.

Business loans available to bid on:

Loan parts available for you to buy:

Gross interest rates are before fees and estimated bad debts. Your actual return may be higher or lower as by lending to businesses, your capital is at risk.

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 (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 24

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

Number of listed loans per week

Loans listed WLR 24

Listed loan value per week

Loan value WLR 24

Total amount lent

Amount lent WLR 24

Loan parts available to buy from other investors

Loan parts WLR 24

News you should know

The European Investment Bank (EIB) and Funding Circle announce ground breaking £100 million investment to UK small businesses. Find out more in City A.M. and The Times.

Loans defaulted last week

Tiling business. Loan 3115. Risk band D

This Lanarkshire business was established in 1982 and was placed into liquidation in July 2014.

Chemical supplier. Loan 13941. Risk band E

This Yorkshire business has been running since 2007 and is 3 months in arrears.

Industrial chemicals specialist. Loan 5482. Risk band A

This Wiltshire business was established in 2000 and is 4 months in arrears.

Solicitors. Loan 4279. Risk band D

This Carmarthenshire business has been running since 2015 and has breached their loan contract.

Financial advisors. Loan 9998. Risk band C

This Tyne and Wear business was established in 2006 and has become unresponsive after missing payments.

UKAS accreditor. Loan 3608. Risk band A

This Derbyshire business has been running since 1996 and was placed into administration in May 2016.

IT solutions. Loan 6101. Risk band B

This West Yorkshire business was established in 2008 and is 3 months in arrears.

Medical wipes business. Loan 13396. Risk band A

This Oxfordshire business has been running since 1984 and was placed into liquidation in May 2016.

Gift card specialist. Loan 14526. Risk band A+

This Kent business was established in 1999 and is being placed into administration.

Lending to businesses can deliver attractive returns, while helping businesses access the finance they need to grow. However, from time-to-time some businesses will be unable to repay their loan, which is why lending a small amount to lots of different businesses is so important. Watch our 90 second diversification video below to find out more. Remember, by lending to businesses your capital is at risk.

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

European Investment Bank commits £100 million to British small businesses through Funding Circle

Today we’re pleased to reveal that the European Investment Bank (EIB) has now committed £100 million to lend to British small businesses through Funding Circle. This investment, alongside £25 million from the Funding Circle SME Income Fund, will enable over £200 million of new loans over seven years, and provides a further injection of much-needed funding into the UK small business sector.

Over the past 10 years, the EIB has provided more than £3 billion of investment to UK small businesses, but this landmark deal is the first time the EIB has supported small businesses through a direct lending platform like Funding Circle. Today’s news is recognition of the role marketplace lending is playing in helping small businesses to access finance efficiently.

Since launching Funding Circle 6 years ago, 15,000 UK businesses have accessed £1.3 billion of business finance, helping them to grow and prosper. Investors are now lending alongside 50,000 people in the UK, local and national government and a range of financial institutions including pension funds.

The UK Government began lending to small businesses through the platform in 2013, committing £20 million initially and then a further £40 million through the British Business Bank programme in 2014. There are also 19 local authorities lending to small businesses through the marketplace.

Our ambition is to create a platform where any investor, big or small, can lend to small businesses. In the last economic downturn, small businesses suffered the most because they could only access finance through a handful of high street banks. This wouldn’t be the case today – already at Funding Circle, there is a range of different types of investor lending through the platform. This diversity will ensure small businesses can continue to grow and expand, and means the marketplace is more sustainable in the long term.

If you’re a small business looking for funding – why not take advantage of today’s news? You can apply online in less than 10 minutes and check your eligibility in just 30 seconds.

If you have any questions, please get in touch or join the conversation on the forum.

The Funding Circle team

Kids publisher hires an assistant | Weekly Lending Review

Week 23: 6 – 10 June

Last week, £8.3 million made its way to small businesses across the country. Your lending has helped businesses with cash flow and enabled small property developers to build family homes.

Hear more from the businesses you’ve supported by watching some of our video case studies.

New loans available to you

There are currently 25 loan requests on the marketplace, and thousands of loan parts available for you to buy which will help you become diversified.

The total value of new loans listed on the Funding Circle marketplace was £10,679,660 averaging at £89,745 per loan. The largest loan value was £437,820 and the smallest loan value was £5,000.

Business loans available to bid on:

– Loan to assist property developer in LeedsGross interest rate 9%

– Retailer in the north-west is looking for £50,000Gross interest rate 8.3%

Loan parts available for you to buy:

– Photocopier company took out a loan to expand their premises. Gross interest rates from 8.2%-9.5%

– PR company needed a loan to hire a web designer. Gross interest rates from 8.2 – 9.3%

Gross interest rates are before fees and estimated bad debts. Your actual return may be higher or lower as by lending to businesses your capital is at risk.

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: 6-Jun represents the week of 6th – 10th June.

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)

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

yield

Number of listed loans per week

listed

Listed loan value per week
value

Total amount lent

lent

Loan parts available to buy from other investors

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Anorak Press hires new member of staff

We visited independent publishing house and Funding Circle borrower Anorak Press, to see how their loan has helped the business grow. Meet business owner Cathy in this short video and have a look through some of her colourful kids magazines.

Enjoy lending to businesses?

We’d love to hear from you! Please provide feedback in this short form and we’ll be in touch with any testimonial opportunities.

Loans defaulted last week

Loan 5077. Risk band C

This business has breached conditions of their loan contract.

Loan 12982. Risk band B

This business has ceased trading.

Loans 8512 and 16472. Risk band D

This business is late with their repayments.

Loan 10698. Risk band C

This business has breached the conditions of their loan contract.

Loan 16648. Risk band A

This business was placed into liquidation in May.

Loan 20151. Risk band A+

This business has called a meeting of creditors and is behind with repayments.

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

Children’s magazine publisher employs permanent staff

Have you heard of the happy mag for kids?

In 2006, Cathy Olmedillas noticed a gap in the market, so she started independent kids publishing house, The Anorak Press.

10 years on, the business is thriving and Cathy creates a range of products for children including Anorak Magazine, for girls and boys between 6 and 12 years old, DOT magazine, for preschoolers, activity books and even has a successful YouTube TV channel.

The Anorak Press aims to encourage children to tap into their imagination and use their creativity to learn. Cathy told us she ‘passionately believes in the magical medium of drawing as a communication tool.’

anorak

The magazines, which are produced four times a year with themes inspired by the British National Curriculum, are printed on recycled paper using vegetable ink. You can pick up a copy at newsstands around the world, or purchase digital copies on the Anorak web shop.

To grow the business Cathy needed to employ permanent staff, so in January this year, she borrowed £25,000. In this short video, meet Cathy and find out how The Anorak Press produces immersive, fun pieces of culture:

Are you interested in lending to businesses like The Anorak Press?

Lend alongside 50,000 investors and support small businesses across the UK by signing up online today. You can use our investor information guide to help you get started and there are thousands of loans which you can be a part of, making it quick and easy to build a diversified portfolio. Remember, by lending to businesses your capital is at risk.

Do you want to hire staff?

More than 15,000 businesses in the UK have accessed finance from Funding Circle, helping with cash flow, refurbishment, hiring staff and much more. Get your instant quote today!

Ways to earn tax-efficient returns | Weekly Lending Review Week 23: 31 May – 3 June

Last week, Investors helped 112 businesses across the UK access £8.35million through the Funding Circle marketplace (please note this is lower than normal due to last week’s bank holiday). Of the new loans listed, the South East was the most popular business location, and property & construction was the most popular sector.

New loans available to you

There are currently 26 loan requests on the marketplace, and thousands of loan parts available for you to buy which will help you become diversified.

The total value of new loans listed on the Funding Circle marketplace was £8,463,740 averaging at £74,602.68 per loan. The largest loan value was £452,220 and the smallest loan value was £5,000.

Business loans available to bid on:

– Educational psychology provider for schools requires £30,000 to take on their first employee.
   Gross interest rate 9.2%

– Care home requires £88,900 to pay for training and extra staff.
   Gross interest rate 11.9%

– Logistics company requires £100,000 for working capital.
   Gross interest rate 8.3%

– Agricultural exporter requires £53,200 to purchase more stock.
   Gross interest rate 10.6%

Gross interest rates are before fees and estimated bad debts. Your actual return may be higher or lower as by lending to businesses your capital is at risk.

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 (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)

Rollingyield

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

Number of listed loans per week

Loanslistedpw

Listed loan value per week
Loanvaluelistedperweek.png

Total amount lent

Amount Listed

Loan parts available to buy from other investors

Loanparts

News you should know

As you may know, in order to launch an Innovative Finance ISA, all peer-to-peer lending platforms are required to be fully authorised by the Financial Conduct Authority (FCA). Although significant progress has been made, we do not yet have a date for when the Funding Circle ISA will be available.

There are a number of other ways you can earn tax-efficient returns in the meantime. You can read more about this on our blog.

Loans defaulted last week

Wholesaler. Loans 4616 and 9966. Risk band A

This Derbyshire business was established in 1997 and was placed into liquidation in April 2016.

Butchers. Loan 5150. Risk band C

This business located in North Wales was established in 2007 and has become unresponsive after missing payments.

Jewellery store. Loan 15850. Risk band A

This London business has been running since 2008 and has ceased trading, and is now in the process of entering liquidation proceedings.

Waste management company. Loan 185854. Risk band B

This Devon business has been trading since 1996 and entered administration in May 2016.

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

 

Collections charges for borrowers more than 90 days late

Today we are making some changes to our terms and conditions which cover charges for late paying businesses. Before placing your next bid, you’ll be asked to re-accept these terms. Further details are outlined below.

At Funding Circle, we have a robust credit assessment process in place to ensure that only creditworthy borrowers are listed on the marketplace. However, from time-to-time some businesses are unable to fully repay their loans, this is called bad debt.

When this happens our in-house Collections and Recoveries team work on investors’ behalf to help the borrower start repaying, or to recover funds by defaulting the loan and commencing recovery proceedings.

Bad debt is part of any form of lending, which is why we recommend investors diversify their lending across at least 100 businesses equally.  As of June 2016, the bad debt rate across the platform was 1.6%, while our estimated bad debt rate was 1.8%. You can see our current marketplace performance on the statistics page.

We believe that we  can deliver the best result for our investors when we carry out many of the tasks involved with the recoveries process directly, rather than outsourcing to a debt collection agency. Since we took our Collections and Recoveries team in-house in February 2014, the actual recovery rate on defaulted loans has risen from 14p/£ to 21p/£ in May 2016, and our estimated recovery rate has risen to more than 40p/£ over a five year period.

To cover the increasing costs incurred by the recoveries process, we are introducing a collections charge for some borrowers who are unable to clear their arrears.

How will the charges work?

Loans that are defaulted, or are more than 90 days late may be charged a collections charge, capped at 15% of the outstanding loan amount owed by the borrower. This will apply to loans originated on or after 6th June 2016. The collections charge is payable by the borrower, will not be deducted from what is owed to investors and will apply to all our loans, including property loans.

When a recovery payment is received from the guarantor or borrower, up to 20% of that payment will be allocated towards the collections charge. In situations where external legal costs may be involved, this figure may be higher, but will never exceed 40% of each recovery payment. As the charges are not deducted from what is owed to investors we estimate that the average repayment plan will take 10-15% longer to complete when the charge is applied.

The table below sets out the maximum amount charged to borrowers, based on the outstanding loan amount at the time of default.

collections charges

The recovery charge will be collected in addition to the amount owed to investors. Approximately 80% of all our recoveries are from guarantors who pay the debt in full (plus interest). For the remaining cases, we will stop collecting the collections charge if it becomes certain that a full recovery will not be made, for example if the guarantor terminates a payment plan and enters an IVA or bankruptcy.  In these cases there will not be a rebate of any collections charges that have been deducted. We will also not apply any collections charge if the loan is repaid in full within four months of the default date.

Why are we doing this?

We are committed to achieving market-leading results for investors and we believe that this charge will help us to do this by covering the costs incurred in the recoveries process, whilst also ensuring we are fair on our borrower community. By keeping our team in-house, we look to make as full a recovery as possible on every loan, therefore investors receive better results than if we were to outsource the recoveries process to a third party.

Updates to the Terms and Conditions

We have made some changes to our T&Cs (specifically clauses 8 and 12), clarifying when fees will be charged to borrowers. Our loan conditions have also been updated which means you’ll need to re-accept them before placing a bid, or, buying a loan part. Please view our updated terms and conditions, or contact a member of our team if you have any questions.

If you have any questions, please don’t hesitate to get in touch.

Enjoy lending,

The Funding Circle team.

We’re the Google generation of financial services. May industry news

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Revealed: the magic formula for a prosperous retirement

Retirement might not be on your mind just yet, but it’s never too early to start planning to ensure that you’re in the best financial position possible when the time comes. The goal of retirement planning is to create a method that works for you. There are many different ways to maximise your savings, depending on what you want to achieve and the risk you are willing and able to take. By properly diversifying your portfolio and spreading your money across hundreds of different loans, marketplace lending is an option that can allow you to earn steady and attractive returns.

UK peer-to-peer lenders talk up regulation after Lending Club ruckus

In the US, you may have seen that the CEO of Lending Club (a consumer lending platform) resigned due to an internal control issue at the business. The news was widely picked up by the media, dominating coverage of the industry over the last few weeks. Fortunately, the issue was discovered quickly due to the high levels of transparency within the sector. At Funding Circle we take internal controls and risk management extremely seriously and continue to invest heavily in these areas. If you have any concerns or questions, please get in touch and we would be happy to discuss further.

Christine Farnish: the ex-regulator defending the peer-to-peer industry

We’re the Google generation of financial services,” says Christine Farish, ex-regulator and former pensions boss. As current independent chair of the P2PFA, the trade body for UK peer-to-peer lending, Christine discusses regulation and the upcoming Innovative Finance ISA. Founded in 2011 by Funding Circle, Zopa and Ratesetter, the P2PFA promotes high standards of conduct and consumer protection, and publicises the benefits of marketplace lending across the country.  

Three ways to get a better return on your savings while interest rates are low

Many investors are still struggling with low interest rates and according to the Mirror, that isn’t likely to improve anytime soon. Using a marketplace lending platform however, may be the solution you’re looking for when thinking about earning attractive returns. You can start by lending as little as £20 and earn an estimated return of 7%*. Since all platforms are different, it’s essential that you understand how each one works and the potential risks involved before lending your money. Remember, your actual return may be higher or lower as by lending to businesses your capital is at risk.

Does securitisation of online loans have a future in Europe?

Towards the end of last month, we saw the first securitisation of European small business loans originated through the Funding Circle marketplace. By opening up small business lending to a wider range of investors, the platform becomes more sustainable for small businesses and investors alike. It also increases lending to the real economy and reduces small businesses’ dependency on bank lending. Further coverage was seen in Reuters.

Britain’s billion-dollar companies: rare finds or mythical creatures?

And finally, over the past few years the UK has fostered an increasing number of successful and fast-growing companies, who have helped to boost the country’s economic recovery through the creation of thousands of jobs. A question that’s often raised is, “When is your company looking to go public?” In our opinion, it’s important to focus on the development aspects first, such as building a robust platform and making the business the best it can be. Having a long-term plan in place that will allow your business to grow sustainably is vital to success.

*The estimated return as of 2nd June 2016 at Funding Circle is 7.1%. It is an estimate of the annual return after fees and bad debts that investors could earn from lending money to businesses seeking loans on 2nd June 2016 It is calculated by taking the gross interest rate less fees and estimated bad debts that will occur in the future for each of the last 100 loans accepted on the marketplace. The average return is compounded and is updated daily.

Update on the Funding Circle ISA

Following our last update in April, we wanted to keep you up to date on our progress towards launching the Funding Circle ISA.

As you may know, in order to launch an Innovative Finance ISA, all peer-to-peer lending platforms are required to be fully authorised by the Financial Conduct Authority (FCA). We have been operating under interim permission since April 2014, and we continue to work closely with the FCA. Although significant progress has been made, it is important that the FCA completes this process in a thorough manner.

Therefore, we do not yet have a date for when the Funding Circle ISA will be available, however as soon as we do, we will let you all know.

Other ways to earn tax-efficient returns

In the meantime, if you are looking for tax-efficient returns you could consider the following:

  • The current tax year ends on 5 April 2017, so there is still plenty of time to take advantage before the subscription deadline. You can also open a Cash or Stocks & Shares ISA elsewhere and transfer it over to the Funding Circle ISA when it becomes available.
  • If you are based in the UK, you can earn tax-free returns by holding shares in the Funding Circle SME Income Fund through either a Stocks & Shares ISA or Self-Invested Personal Pension. Speak to your financial adviser for more information.
  • Thanks to the new Personal Savings Allowance introduced by the Chancellor last year, the first £1,000 of interest earned for basic rate taxpayers and the first £500 of interest for higher rate taxpayers is now free of income tax. The Personal Savings Allowance is not available for additional rate taxpayers. This applies to interest earned through Funding Circle as well as through other traditional savings accounts. More information, including a link to the full guidance from HMRC, can be found in our F.A.Q
  • If you are lending as an individual, a new bad debt relief is also available through peer-to-peer lending platforms for loans that have become irrecoverable. The tax statement available to you has been updated to reflect these changes, and more information can be found in our F.A.Q.

Remember, by lending through Funding Circle or investing in the Funding Circle SME Income Fund your capital is at risk.

We hope this update has been useful, however if you have any further questions please feel free to contact us and we’ll be happy to help

Enjoy lending,

The Funding Circle team

 

*This blog post is provided for information purposes only and is not intended to be construed as an offer, invitation or inducement to engage in investment activity in relation to – or a financial promotion of – Funding Circle SME Income Fund. Funding Circle does not give investment advice or recommendations and this blog post should not be relied upon as such*