Property development lending – important update

Funding Circle’s long term goal is to become the first choice for small businesses here in the UK and across the world. By attracting thousands more businesses to the platform, we can offer you many more lending opportunities, allowing you to continue to earn an attractive, stable return. To meet this goal, we have taken the decision to focus on our core small business lending product in the UK and our other markets and will scale down new property development lending, expecting to stop all lending by mid-2018.

We are proud of the lending we have facilitated to small developers since 2014. The borrowers you have lent to have built thousands of homes and credit performance has been strong; loans have generated a 7% annual return* (as of 10th April 2017) and you have earned more than £22m in interest.

By focusing on our core product you will be able to help thousands more small businesses to access finance and grow. Over the last year you have lent record-breaking amounts, with approximately £280m lent to small business borrowers in the first three months of 2017. We expect this trend to continue.

It’s important to note that this decision is not related to credit performance of property development loans, which have outperformed expectations over the last three years and we expect this to remain the case.

We will continue to work on your behalf to service all existing property development loans. There will still be opportunities for you to lend to experienced property professionals over the next 12 months.

If you have any questions on today’s news, please get in touch at

Enjoy lending,

The Funding Circle team

*Past performance is not a guarantee of future returns. Returns shown may change over time as some businesses may not be able to fully repay their loans.

Jack Pritchett

Senior Communications Manager


18 thoughts on “Property development lending – important update

  1. Bit of an odd decision imo. 1) FC seem very casual in allocating risk bands to non-property loans, e.g. we often see A+ risk bands where the company makes a loss and has negative net asset value. At least with property we know there are assets behind the loan. 2) I would have expected a more detailed reason to be given for withdrawing from property loans, rather than the generalised comments you’ve made about focussing on core business.

  2. I agree Clive. I have been lending exclusively to property loans in the last year or so as I prefer the shorter loan term and the security of first charge over the property, having found the personal guarantees given on the small business loans somewhat unreliable, seems if the business goes bust the guarantors often go the same way. I have asked FC for clarification, my guess is they don’t make as much money on these loans and/or have to do more work to approve them? Think my only option will be to say ‘ I’m out’ and withdraw my funds.
    Regard, Graeme

    • Hi Graeme, if you could lend at a 50 LTV owner occupier mortgage with a term of 5 years. What yield would you be looking for?

    • I agree with you. My early experience with non-property loans was patchy. This seems a very strange move. I don’t feel they are being completely frank with us.

  3. I agree with both Clive & Graeme. FC appeared to be very eager to get into property loans a few years back, now they appear to be eager to “get out”. I wonder what’s changed. I have also been reducing my funding over the last few months.

  4. It’s rare for FC to list a property loan without a material error in the details or a material question left unanswered. Strikes me that they’ve not really been bothered with such loans for some time now given the lack of effort put in to ensure accuracy and clarity.

    Personally not fussed about this decision because those errors have put me off investing any further with FC on any loan.

  5. This does seem curious as there appear to be a lack of business loans being offered recently, and the property loans were for much larger amounts, and my experience has been that they have much greater security and smaller losses.
    I will probably have to consider diversifing my investments to other platforms

    • Hi Stuart Stanley, investors lending through Funding Circle have lent record-breaking amounts to small businesses over the last 12 months, with over £280 million lent to small business borrowers in the first three month of 2017 alone. We expect this trend to continue as we focus on our core small business lending product. It is worth noting that as loans on the loan request page close as soon as they are fully funded, property loans tend to stay listed for longer periods of time due to their larger average size.

      Our track record shows that lending to small businesses has delivered attractive, stable returns, and we do not expect there to be a significant change to the returns earned by well-diversified investors. We aim to deliver a c.7% return to investors and are confident that we will be able to deliver this over the short and long term. If you would like to discuss this further please get in touch at

  6. Just to add a point: This country has a serious lack of housing. Whilst the Gov’t focus on affordable housing, the rest of the housing market also needs significantly improving. FC loans to small property developers feed much-needed cash directly to where it is needed.
    Jack Pritchett’s post above states, “It’s important to note that this decision is not related to credit performance of property development loans, which have outperformed expectations over the last three years and we expect this to remain the case.” Why on earth would you abandon such a lucrative revenue stream that is set to run for years?

    • Hi AndyS, thank you for your feedback. Success in the small business lending space will be driven by data and advanced analytics. Property borrowers share many of the same characteristics as small business borrowers but the asset class is not as data focused. This decision also brings the UK business in line with the rest of our international business. If you would like to discuss this further please get in touch at

    • Article on Citywire suggests the risk from property loans going bad wasn’t to us individual lenders, but to FC’s own fund (FCIF):

      “The share placing coincides with Funding Circle’s announcement that it will scale down new property development lending, with plans to completely stop lending of this type by mid-2018.

      This is a move that has been welcomed by Jefferies equity analyst Matthew Hose, who notes that property development loans represent the main area of potential risk for the fund”

    • Hi Mr H, this decision has not been influenced by the IFISA, or our ongoing authorisation process with the FCA. We have made this decision in order to focus on our core small business lending product, which will allow us to build on our leadership position in all of our markets. Thanks

  7. I’m another FC lender who has been very happy to go with shorter term, asset backed, loans in the property market. The FC explanation for ditching them certainly doesn’t ring true. However, the number of property loans which have over-run, demanding (no doubt) a lot of extra effort on the part of FC staff to manage them, may well have something to do with it, in my view.

  8. Has the decision to pull out of new development loans anything to do with FCA regulations?

  9. Can you expand a bit more as to why FC are pulling out of property loans – I don’t recall this being announced as a temporary measure when it was introduced. Also will there be an update blog for all defaulted property loans as I am sure this will be of interest to a lot of us. Thanks a lot

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