Your top questions answered – part 2
Following on from our post last month, we have more of your top questions answered by our Investor Support team. If you have more queries about your account, how lending works or Funding Circle in general, the team are always happy to help.
Why do I need to verify my bank account?
When it comes to withdrawals from Funding Circle, we need to make sure that the details inputted into the website are correct and that they belong to the registered Funding Circle investor. To do this, we have to ask you to verify your bank account. There are two main benefits of this:
- It helps prevent mistakes that could be made when inputting details, stopping funds being withdrawn to the wrong account
- It acts as a security measure, so if another individual was to gain access to your Funding Circle account, they would not be able to withdraw your funds to their own bank account
Normally we can verify your bank account quickly online. We need to do this even if you are using the same account you paid in from as we do not store these details on our system.
Whilst the majority of accounts will be able to be verified online, unfortunately there are some bank accounts that cannot be verified electronically. If this happens, we will ask you to send certain documents to our Investor Support team.
I have created an account and transferred my funds in, is there anything else I need to do?
Once you have transferred funds into your account, you simply need to select one of the two lending options (Balanced or Conservative). Your funds will then be automatically lent to businesses. Depending on activity at the time, sometimes it can take a few days or up to a couple of weeks for funds to be lent. After that, there is nothing else you need to do to ensure your funds are lent out.
Thanks to our simple lending experience, your repayments will continue to be lent automatically. However, there are things you can do to help manage your account and maximise your return:
- Diversification – We suggest lending £2,000 or more for a more stable return
- Set up a standing order – Thanks to the effects of compound interest, regular payments can help accelerate your earnings
- Set up a nominated bank account – Verify your bank account so it’s ready for when you want to withdraw funds
Can I choose the term I lend for?
To make lending simple and fair for all investors, all investors’ funds are lent out automatically by our lending tool. It will match your funds to loans ranging from six months to five years. Plus if you keep lending switched on, it will continually lend out your repayments to help maximise your earnings.
When you want to withdraw your funds you have two options:
Withdraw as you go
Turn off reinvesting and withdraw your repayments as they come in.
Withdraw a lump sum
Select the amount you’d like to withdraw, and sell your active loans to other investors using our automatic selling tool.
There are no fees for selling or withdrawing loans. While usually very fast, selling loans is not instant and depends on demand from other investors looking to buy at that time. You can only sell active loans with no credit issues, and not in the last month of their term.
How much of my funds will be lent to each business? Can I choose how much will be lent to each loan?
Our automatic lending tool will select loan parts to help you build a well diversified portfolio. The minimum you can lend to a new business is £20. So if you lend £2,000 in total, it will spread your funds across 100 businesses, with £20 (or 1%) lent to each.
If you have a higher amount in your account it will diversify your account further, lending no more than 0.5% of your total to any one business. For example:
£5,000 total = 200 loan parts of £25 each
£20,000 total = 200 loan parts of £100 each
To make them easier to sell to other investors, loan parts are capped at £100. So if you have a large amount in your account you will have multiple loan parts with the same business. For example:
0.5% of £100,000 = £500
£500 = 5 x £100 loan parts
We suggest lending £2,000 or more so you can lend to at least 100 businesses, with no more than 1% of your total going to each one. Every investor who has followed these two steps has earned a positive return. 98% have earned 4% or more. If you’d like to start with less, the minimum initial transfer is £1,000. Correct as of 31st December 2017.
More information can be found in our investor guide. Remember, by lending to businesses your capital is at risk.