How lending £2,000 could help you earn even more attractive returns
By lending a little or a lot, Funding Circle investors can earn attractive returns and help businesses across the UK access much needed finance to prosper and grow.
Ready to take the £2,000 challenge?
In this post we’re looking at how lending at least £2,000 to 100 businesses could help you earn a more stable return.
Barbara has worked at Beech’s Fine Chocolates, who took out a £250,000 loan to keep up with high demand, in Lancashire for almost 50 years! Meet the team in this short video.
Minimise risk by lending to lots of businesses
When lending to businesses, it’s important to remember that a small percentage will be unable to fully repay their loan. This is known as a bad debt, and is a normal part of lending to businesses.
The best way to reduce the impact of bad debt is diversification. This simply means spreading your lending across lots of businesses, so you’re only lending a small amount to each one.
Why is £2,000 important?
We advise all investors to follow theses two steps:
- Lend to at least 100 businesses
- Lend no more than 1% of your total to each one
Every investor who has followed these two simple steps has earned a positive return, with 91% earning 5% or more after following these steps for at least a year. (Data correct as of 16th February 2017)
The smallest amount you can lend to any individual business is £20. So, in order to lend to 100+ businesses, you need to lend at least £2,000 in total.
If you were to lend £20 to 100 businesses, if one or two of those businesses are unable to pay back their loan, it would only have a small impact on your overall return.
Reach £2,000 by setting up a standing order
Our autobid tool can help you diversify in the click of a button. You can transfer £2,000 to become diversified straightaway, or build up to £2,000 by making smaller transfers into your account.
Standing orders are a simple way to add to your account each month. If you were to put £100 a month in your Funding Circle account by standing order from April 2017, by November 2018 you’d have reached your £2,000 lending goal, and that doesn’t even take into account compound returns!
We hope you have found this useful, and if you have any questions about your account please get in touch.
The Funding Circle team
Remember, by lending to businesses your capital is at risk.
This blog is a general summary, and should not replace financial advice tailored to your specific circumstances. Funding Circle is not authorised to, and does not, provide investment, tax, legal or regulatory advice. If you have any questions, please speak to your professional advisor or seek independent specialist advice.