Important update on lending through Funding Circle

Today the British Business Bank (BBB) has accredited Funding Circle to the Government’s Coronavirus Business Interruption Loan Scheme (CBILS). This will allow us to help small businesses access crucial government-guaranteed loans during this unprecedented time. To ensure we are helping as many small businesses as possible, we have taken the decision to focus solely on originating loans through the CBIL scheme during this period. 

As retail investors are not currently able to participate in these loans, from today we will pause new lending for all retail investors and any institutions not participating in the scheme.

What this means for your portfolio

From today, we will turn off new lending for all retail investors. The businesses you have lent to will continue to make monthly principal and interest repayments, which will accumulate in your available funds and can be withdrawn to your nominated bank account or by ISA transfer at any time. 

Offering CBILS loans will also further support the businesses you have lent to, helping them trade through this period and protecting your returns. We will continue to service your loans and collect repayments, and our team will continue to be on hand to support you with any queries you may have.

We remain committed to retail investors

This is a temporary measure while we do everything we can to help small businesses through this period. Long term, we remain committed to providing retail investors like you with access to small business loans through the platform, and we expect to re-open the retail investor marketplace in due course. 

This has been a difficult decision for us to make, and we know that it will be disappointing for many of you. We look forward to welcoming you back when we’re able to, however we wanted to thank you for the support you have provided to both our platform and small businesses. To date, you have helped more than 57,000 businesses access the finance they needed to grow; creating tens of thousands of jobs and contributing billions of pounds to the UK economy. 

We will be in touch once you are able to continue supporting small businesses across the UK. If you have any questions, please don’t hesitate to get in touch.

The Funding Circle Team

Update on the secondary market

As part of our ongoing measures to protect investor returns, we have taken the decision to pause the secondary market while we continue to evaluate the potential impact of Covid-19.

This forms part of a number of measures introduced recently. Over the last few weeks, we have tightened our credit risk parameters for new loans. We have also strengthened our Collections and Recoveries capabilities, to support the businesses you are already lending to with maintaining their payments over the term of the loan. As a regulated platform, we also want to ensure that loans bought and sold by investors on the secondary market are priced fairly. This means taking into account the wider economy and how it might impact small businesses.

The businesses you have lent to are good, creditworthy businesses and we expect returns to remain resilient over the coming period. However, given the current environment we have decided to be prudent and pause all loan part sales on the secondary market. This does not affect your ability to access funds from the monthly repayments you receive from borrowers. If your lending is turned off you will typically receive 3-5% back of your outstanding portfolio every month. 

Pausing the secondary market means you will no longer be able to sell your loan parts to other investors, or purchase existing loans from other investors. If you currently have an active sale request, no further loan parts will be sold, and your loan parts will be delisted over the next week. 

As we have more clarity over the coming months, we hope to be in a position to resume the secondary market. 

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

The Funding Circle Team

Further actions to protect your returns

Last week, we outlined some of the actions we have taken to protect your returns on our platform, including tightening our credit risk parameters and strengthening our Collections and Recoveries capabilities

As this fast-moving situation develops, we will continue to ensure your portfolio is well-positioned to deliver resilient returns. We wanted to highlight two areas where we have introduced measures to support this work:

Minimising avoidable credit losses

The ongoing restrictions on daily economic life will not impact all businesses equally within the diversified portfolio of businesses you lend to. However, it is inevitable that some will experience an impact as a result of the Coronavirus and may find it difficult to make their full monthly repayments. While the Government has announced a range of unprecedented and wide-ranging measures to support small businesses, these will take time to get fully up and running. This means that over the next few months you are likely to see an increase in the number of late loans in your account. 

We have deployed additional resources to our Collections and Recoveries team who are working closely to support these businesses through this period. Providing flexibility in the short-term—for example through payment plans which allow businesses to reduce or have a temporary break from their repayments—will help many of these businesses to get through the next few months, and allow them to maintain their monthly repayments over the term of the loan. This will minimise avoidable credit losses in the long run, protecting your returns in the process.

Continuing to build resilient portfolios

Last week, we discussed some of the measures we have taken to protect investor returns. These included strengthening our credit criteria and increasing our pricing on new loans to reflect how the economy may perform. In addition to lending to new businesses, investors also purchase existing loans sold by other investors. It is important that these loans are purchased at prices that reflect current market conditions, so in the future we may need to adjust the Transfer Payment paid from the seller of the loan part to the purchasing investor.

As the Transfer Payment goes to the buyer of the loan—rather than Funding Circle—this will help to ensure investors continue building resilient portfolios that are well-positioned to withstand changes in the economy. We closely monitor both our loanbook and the external environment, and will review the Transfer Payment on an ongoing basis. If we adjust this we will update investors listing their loans for sale at that time. Otherwise, we will keep you updated through the Access Money Tab on your account, where you will be able to see the current Transfer Payment being applied.

Continuing to provide vital support to the UK’s small businesses

The ability of businesses to access finance is more vital than ever, and your lending will form an integral part of this support. If you have any questions, please don’t hesitate to get in touch. Remember, by lending to businesses your capital is at risk, and your investment is not covered by the Financial Services Compensation Scheme.

The Funding Circle Team