A pleasure to meet you!

2014 has already seen a number of new developments at Funding Circle, including the introduction of regulation, the announcement of additional funding by the Government-backed British Business Bank and the start of our tailored property loans for businesses. With the number of investors fast approaching 30,000 we wanted to host an investor evening to meet more of you in person, and hear first-hand about your experience of investing through Funding Circle.

Last Thursday we had the pleasure of meeting about 30 of you at our first event for investors. It proved to be a great forum for debate and feedback, with many interesting and useful points raised – we hope those that attended agree, and many thanks to you for giving up your time to come and say hello.

We appreciate that not everyone is able to travel to London, so we filmed the event and will be publishing a video shortly. In the meantime though, we wanted to write up some of the key themes discussed in a three part blog series. This first post will take a look at some of the key points raised during the credit assessment and analytics session.

Credit assessment & analytics

Rahul, our Head of Credit Analytics, and Ari, our Head of Underwriting, kicked things off with a discussion on our credit assessment process and the risk models we build to help us determine which businesses to list on the marketplace.


We discussed how these models ensure we remain within our estimated loss rate and why we’re constantly improving them so that only the most creditworthy businesses make it through to the credit assessment team. We also covered off our five-stage credit assessment process, and why ‘big data’ analytics, combined with a personal review of every application delivers superior credit performance.


Key things to come out of the Q&A included:

Q: How many pairs of eyes look at a single loan application?

A: Businesses go through a five stage credit assessment process at Funding Circle. Two of these are automated; the first is a credit model we have built and continue to improve following data from past performance of loans, and the fourth is a model which looks at whether the business meets the criteria for a Funding Circle loan. We manually assess stages 2, 3 and 5, and the sales, underwriting assistants, and underwriting teams respectively all work incredibly closely together to ensure that information is shared and assessed at each stage.

Q: Are you prepared for another economic downturn?

A: The answer to this is two fold. In terms of listing new loans on the marketplace, our risk bands are calibrated to target the expected annual loss rates that we publish on the site and this would not change in the event of a downturn. Loans that might have previously been listed as A+ would simply be listed as a B, for example, and loans that might have been listed as C- would be rejected.

In terms of our existing loan book, we take three factors into account when calculating the expected annual loss rate. The first is whether or not the business is expected to default. The second is the time at which the business defaults; for example a business which defaults after 1 repayment compared to a business who is unable to repay after 50 of 60 repayments will owe considerably more. The third factor is how much we expect to recover following the default. For both the second and third factors, we have taken a significant downturn into account and calculated the loss rate using stressed estimates.

Next week…

…we’ll be posting the second and third part of this series which will include key points discussed with collections & recoveries, and tech & product, as well as a Q&A with the co-founders.

Update on whole loans trial

At the start of May we announced that we will be trialing whole loans at Funding Circle. The trial has been successful with approximately £1.3 million lent to UK businesses as whole loans.

As a result of this success, we are continuing with the trial for another few weeks and planning an official roll-out to all investors, which we anticipate will take place within the next month.

As we get closer to the official launch, we’ll provide further information to all investors and include details about how whole loans will be presented on the marketplace.

The Funding Circle team.


“763 people lent to us, which felt like tiny votes of confidence!”

Business owners David and Geoff share their Funding Circle experience.

After the success of The Exhibition Rooms restaurant in Crystal Palace, David and Geoff wanted to open a second neighbourhood restaurant, and needed a business loan to refurbish the premises.

In this picture story you’ll find out how they met, where they’ve come from, and how peer-to-peer lending has helped their business along the way.

You can also watch their business story in this short video.










Final Slide

If you’ve got a UK business that’s been trading for at least 2 years and has a turnover of £100,000 or more, you can apply online at any time. We’ll always get back to you within 2 working days of receiving your complete application.


Introducing whole loans

It’s been a fantastic start to the year at Funding Circle. The announcement of additional funding by the Government-backed British Business Bank and the introduction of regulation by the FCA helped to drive a record quarter of lending, with more than £53 million lent to small businesses across the UK – more than two and a half times the amount during the same period of 2013.

At Funding Circle our goal is to build a better financial world by helping as many businesses as possible to access finance, and investors to earn attractive returns.

Over the last few months you will have seen an increase in lending opportunities with record levels of demand from businesses across the UK. Within the next 12 months we expect demand to increase substantially, and our aim over the next few years is to grow to become a significant part of the small business lending market. In the UK, this is an estimated £7.5bn per month market.

To achieve this we want to ensure we have a diverse range of investors at Funding Circle. More investors helps us to attract more businesses, as we have seen from the Government’s involvement. This helps to deliver more lending opportunities for everyone and ensures long-term stability and sustainability for the Funding Circle marketplace.

As you will probably be aware, we have mentioned before that there is a lot of interest from organisations, such as pension funds, insurance companies, family offices and hedge funds, to join Funding Circle to lend.

We have been considering the best way to introduce these new types of investors to the marketplace in a way that is sustainable and also protects the experience of individual investors.

As part of our considerations we have closely followed the developments of the US peer-to-peer lending market over the last 18 months, where larger investors have purchased whole loans rather than lots of individual loan parts. This has shown to us that introducing the ability for investors to buy whole loans is a successful way of creating more lending opportunities for everyone, whilst also protecting individual investors’ Funding Circle experience.

Today we’re announcing that from early May we will be starting a one month ‘whole loans’ trial with a small group of non-bank financial institutions who will lend up to £3m in total. These whole loans will be purchased in full and it will not be possible for individual loan parts to be purchased, as is the case with the ‘partial loans’ that are listed today.

Initially, this will be a closed trial and last for one month beginning 1st May. During the trial whole loans will not be visible on the marketplace; however we will continue to publish details of every loan in our loan book and clearly indicate whether a loan is a whole loan or a partial loan.

While we anticipate most investors will continue to prefer lending on partial loans, once the trial has been successfully completed we will make whole loans available to any interested investors. You can register your interest after the trial by contacting us at community@fundingcircle.com.

Today’s news does not mean individual investors will become any less important to us. Helping individuals earn attractive returns by backing British businesses is in the DNA of Funding Circle. It is something we are very proud of and will remain a core part of the business as we grow.

For more information about today’s news, visit our FAQs or join us on our forum where we will be discussing this in more detail. You can also read more here about how whole loans have worked in the US.

The Funding Circle team

Video: Did you help a South London restaurant open its second set of doors?

The Exhibition Rooms is an award-winning restaurant and bar based in Crystal Palace, winning Time Out’s best local restaurant in 2009. It was started in 2008 by two friends, David Massey and Geoff Ridgeon, and has since gained an excellent reputation on a number of restaurant review sites. Geoff is an experienced restaurateur and David is the head chef, having worked alongside Anthony Worrall Thompson.

In February, they took out a business loan through Funding Circle which was funded by 763 people and organisations across the UK, so they could develop a new restaurant site.

In this video you’ll meet David and Geoff and hear from them first-hand about how their restaurant started and why they believe they’ve got something special.

Crowdfunding or peer-to-peer lending – which is best for my business?

Crowdfunding or peer-to-peer lending? This is the question many business owners are asking now that these alternative forms of business finance have become mainstream on the back of ineffective lending from the banks. So the ultimate question then is, which method of finance would work best for you and your business?

Crowdfunding and peer-to-peer lending are two innovative ways to get money into your business. They’ve been making headlines over the past few years and it’s fair to say that you’ll have had to have been hiding under a rock for you to not have heard of at least one of them!

A lot of people actually don’t realise that crowdfunding and peer-to-peer lending are two very different beasts; both share the same principle of raising finance from a number of people who pool together, but it’s likely that one will better suit your business needs, depending on what stage your business is at.

Artboard 1 copy@2x

If you’ve got a great idea and need some help getting it off the ground, crowdfunding is for you.

Crowdfunding is a great option for startups and early stage businesses. You “pitch” your idea or business to potential investors, and if interested, they will contribute a sum to the proposed venture. Then you decide how you want to reward those lovely people who helped you make it happen.

Crowdfunding in its earliest form focussed on helping entrepreneurial creatives and inventors to get their creative ideas off the ground. The people who chipped in and made their dreams a reality were then given something in return, like a unique perk, a gift, or first dibs on their product. This is what’s known as reward-based crowdfunding – one to consider if you’ve got a cool little gadget you want to develop. Kickstarter is the world’s largest reward-based crowdfunder, and has just passed the milestone of $1 billion pledged; $54 million of that has come from the UK.

Like all new things, the concept of crowdfunding has evolved into different forms, with investment crowdfunding now starting to grow rapidly. In this model, instead of giving a reward to those who helped, you actually give them equity in your business. Key UK proponents of investment Crowdfunding are Seedrs and Crowdcube.

What will my business need to be crowdfunded?

Crowdfunding platforms will typically want a business with a business plan and financial forecasts from you when you make your application, so it’s important you get these in order. You could take a look at Planwriter or iAdviseUK for some tips on how to get these right.

If you did want to go down the investment route and release equity in your business, there are quite a few legals that you’ll need to deal with and you’ll also need to make sure you keep your shareholders in the loop with what’s happening further down the line.

To help you get started, Nesta have some general crowdfunding tips, from pre-launch to how to tell your story. Entrepreneur also provides 5 steps to crowdfunding success, placing importance on interaction with your supporters and considering feedback.

If you’ve got an established business then peer-to-peer lending is the one for you

Peer-to-peer lending is a fast and accessible way of getting a cash injection into your business. The essential difference between this and investment crowdfunding is that you do not give away any equity, but rather pay interest on the money you borrow, much like you would with a bank. Whether your loan is for a piece of kit for your factory, purchasing a property, buying stock or even working capital, peer-to-peer lending for businesses offers the most accessible and flexible way of getting finance for established businesses.

Peer-to-peer loans are usually funded by a number of different people, and in the case of Funding Circle, you’ll also have your loan funded by local councils, Huddersfield University and the Government-backed British Business Bank Programme.*

Peer-to-peer lending is a viable alternative to traditional funders, as you can apply for loans up to £1 million in the case of Funding Circle and £3 million for Thincats, repayable over terms of up to 5 years.


Tushar & Mehul Shah from Bluebird Care. The business borrowed £150k from peer-to-peer lender Funding Circle.

What sort of credentials will my business need to have?

Peer-to-peer lending is suitable for all established business, including limited companies, limited liability partnerships and non-limited companies, generally trading for at least 2 years or more. As part of the application, you’ll have to provide your businesses financials (filed accounts or equivalent) and reasons for why your business needs a loan. This information should be pretty easy to source, so by way of preparation there isn’t that much extra you’ll need to do.

It’s worth noting that depending on the size of the loan you’re after, security in some form will be required. This could either be a personal guarantee or they may take security of a particular asset or assets in your business. You should check when you apply, as each platform will have different policies.

Which would work best for my business?

In a nutshell, if you have a great idea that’s yet to get off the ground, then go for crowdfunding. But, if your business is well established and you’re looking for a business loan, then you’d be better suited to one of the peer-to-peer lending platforms.

Hopefully we’ve shed some light on the differences between the innovative finance options out there. Both are viable, but it’s important to evaluate the pros and cons of each model before you decide.

And finally…

This week, the UK’s leading alternative business funders met to launch a web portal designed to help you find the the most appropriate source of funding, which should aid with your decision making.

* The British Business Bank programme is currently run directly by the Department for Business, Innovation and Skills and is not authorised or regulated by the Financial Conduct Authority or the Prudential Regulation Authority. British Business Bank plc will operate as a Government-owned financial institution once HM Government has received European Commission State aid clearance, which is expected in 2014.


Your 5 minutes with.. the Credit Analytics team

Following on from our interview with the Credit Assessment Team, we’re now with Rahul, James and Hossein, who make up our credit analytics team. These guys are our data experts and build statistical models for every part of our business, including that ‘in house credit model’ I referenced in the last interview.

Although there are only 3 of them, what they lack in numbers, they make up for in experience. Rahul started at Funding Circle in 2012, and James and Hossein came on board in 2013. Between them they share an impressive 3 undergraduate degrees, 3 MBAs, 1.5 PHDs and 17 years working in risk and consulting. Pretty good eh?

IMG_2992-2 (1)

In a nutshell, this team builds models.

The credit analytics team builds statistical models to predict the future, which we base a good portion of our business decisions on. The main area they focus on is credit risk, or in other words, the probability of a business not being able to pay back their loan. Statistical models are involved in all parts of Funding Circle so as a result, they work closely with teams across the company. And, especially close with those on the credit team, and together they form our Credit Committee.

Welcome to the interview. I have to say, this is going to be as much of a learning experience as it is running an interview! Can you take me through your day-to-day activities?

Rahul: Yes of course. A lot of our time goes into collecting data. We’re responsible for the credit infrastructure so we can build and refine our models. So to do that, we interact with data collection bureaus like Experian and Creditsafe to obtain the information we need. The other half of our time then goes into analysing the information that we’ve collected. We build excel-based models for a wide variety of needs; assessing and quantifying the risk of a loan for example. Every statistical model related to any part of the business comes through us.

OK, so what does that mean in the context of risk?

Rahul: Every borrower will have an expectation of loss. Our credit assessment team will use the expectation which the model provides, to approve or reject the loan application. If we expect the loan to default then a loan is rejected. But, models have errors in them inherently. This means that of the businesses we have approved, we still have an expected and estimated target loss rate.

Our intent is not to have zero losses, our intent is to have a precise estimate of what the loss rate is. eg. in the A+ risk band, we expect 0.6% of loans to default, net of recoveries.

The goal of our team is to not only make sure our loss rates and assessments are accurate, but also to ensure that our portfolio experiences the loss rates that we publish. We utilise the data from our loan book which has over 3 years of information to allow us to rebuild our models regularly to incorporate new information.

How did you come into building models, do you all have financial or statistical backgrounds?

James: I joined about 5 months ago, and prior to Funding Circle I was actually in academia. I studied theoretical physics at university and I have a Masters in financial maths.

Hossein: I did my PHD at Stanford and then I attended the Business School. I’ve also worked with a quantitative hedge fund and I’ve advised a number of startups in Silicon Valley.

Rahul: I studied engineering and then completed my MBA in India. I’ve worked as a consultant, and in risk management areas in a number of banks. I completed my second MBA in the States and then moved to London to work as a consultant, before starting at Funding Circle.

Quite a range of backgrounds then! So why did you decide to work at Funding Circle?

Hossein: Innovation in the financial industry is very rare, and I think that was the most exciting part for me. Peer-to-peer lending is disrupting one of the oldest professions in the world, and I wanted to be part of it!

Rahul: I was initially approached by a headhunter and then spoke to one of the co-founders Andrew [Mullinger]. He talked so excitedly about the business that I was sold in 10 minutes flat. The role itself also appealed to me; it was more of a startup when I joined so a lot of the processes had to be built from the ground up. The challenge the role presented was exciting, and after working in banks for 10 years I really wanted a change.

James: I was halfway through my PHD and the opportunity of Funding Circle came to me through my professor. I thought my PHD needed a new direction, saw Funding Circle and what it was all about and thought it would be a perfect route to follow.

How do we differ to other places you’ve worked at or had experience in?

Rahul: This is my first experience of working in a company with less than 100 employees, so there definitely are differences. We don’t have the legacy drag that banks have, so I feel our process is much more agile and lean. Changes and improvements take less time to implement which is really refreshing.

Hossein: I’ve worked in startups for the majority of my career. But I’ve worked with larger financial organisations in the past, and I think the key difference is, as Rahul mentioned, the time it takes to make decisions. We get things done quickly, and we have more freedom to research and implement ideas.

James: Well this is my first experience in a workplace environment. Although the research projects I undertook whilst in academics may have had different applications, the underlying theory and methodology can be transferred to a lot of different fields, including credit risk. So there’s a lot of overlap which has made it a smooth transition. In academia, nothing is applied first hand to the real world so you perhaps lose sight of what the goal is. Now I know what we’re aiming to achieve. Not only can you use the stuff you’ve learned, but you actually get to see what happens at the end.

With so many different projects going on, this must be pretty tricky to manage. What would you consider to be the most challenging part of your job?

James: Yeah as we’re always working on a number of different projects, you’re constantly dipping in and out of different areas and teams which can be a challenge, but I wouldn’t want it any other way.

Rahul: There are pros and cons to working in a young company. You can get involved in so many different things, but it may be challenging as there is a limited amount of resource. We have had to build everything from the ground up and when I joined, there was a lot less structure. The hard part is really to get things up and running quickly, when we have limited resources as we’re growing at a rapid rate. This I’d say is a good problem to have.

Hossein: Sometimes you think, “is there an accepted or obvious way of doing something that I’m missing?” That’s what makes it exciting, there isn’t a manual that you just read. You always have to think for yourself.

Exactly, and by thinking all the time, new solutions will be more forthcoming. What do you enjoy most about working here?

James: The culture is really cool, there’s a relaxed atmosphere but there is always direction. I’ve had the opportunity to work with lots of different teams, like the insolvency and marketing teams, which is great because I learn what’s going on in the company. I always know why I’m doing something, which I like.

Hossein: The culture is definitely a huge plus and I enjoy the work itself. It’s so exciting to be a part of the innovation and disruption of one part of the financial industry.

Rahul: Yes I agree, the culture is great. It’s so refreshing working here, we’re young and energetic.

The culture and people have been the most popular answers in this series so far. So let’s finish with this one, do you have any interesting facts or hobbies you’d like to share us?

James: I produce music in my free time, and I’m releasing an EP on a Berlin music label which I’m excited, if not nervous, about.

Hossein: Photography is the thing I like most. I recently bought an iMac which is exciting, there is so much you can do with them!

Rahul: I always wanted to join the army, but I got rejected because I wore thick glasses. So I decided on models instead! And, I really enjoy playing table tennis in the office.

I can vouch for that. For those who don’t know, we have a table tennis table in the office and Rahul puts up a very good fight…

Rahul: Yes, and don’t forget about Ping-Pong Fight Club last year! It was an all Funding Circle final in the competition for London tech startups. Helene (our Technical Project Manager)  played very well, but I managed to beat her!

Helene played competitively at an international level, so that was very good going. And how could we forget, the trophies that Rahul & Helene won for Funding Circle are the largest we’ve won, and have pride of place by our reception area.


So far we’ve met people in the credit, insolvency and customer relations team. Who would you like to meet next?


What did 2013 look like for Funding Circle?

Although 2014 is fully underway, we’ve taken a moment to stop and reflect at what 2013 meant for the whole of the Funding Circle community.

We’ve put a short video together highlighting some of the best moments from 2013: ranging from visiting businesses across the country, to launching Funding Circle in the States, to having the Government, Huddersfield University and local councils all lend alongside the British public.

We also look towards the rest of 2014 and what it will mean for our community. There’s no better way to get you excited for the new products that are launching this year, including property finance which will be landing on the marketplace over the coming month.

Here’s to an even more exciting 2014, where we look forward to helping many more thousands of businesses access finance, whilst helping different types of investors earn a better return on their money.

Updates to the Terms & Conditions

Following from our last update, we’re making some additional changes to our Terms & Conditions which will be introduced on Monday 17th February 2014.

These changes will reflect (1) improvements to our debt collection processes which are being brought in-house, (2) more lending and borrowing opportunities through the extension of loan types on the marketplace, and (3) necessary changes for FCA regulation later this year.

Here are the key changes you should know about:

1. We’re improving our debt collection and bringing it in-house

We will soon handle all debt collection procedures in-house so we can work directly with responsive borrowers to help them if they come into financial difficulty, which will also help us to provide more detailed communication to investors about these loans.

We’re also making changes to ensure that we can act faster and more robustly with non-responsive borrowers. Going forward, investors will now have 7 days to opt out of novation after a loan defaults, reduced from 14.

We’re improving the clarity in the Loan Conditions surrounding payments received from businesses whose loan is in arrears. Any payment received will be first applied to the arrears, before the most recent monthly amount owed.

2. Bringing more property finance to the marketplace

As you may be aware, we are expanding the types of loans on offer to investors and businesses, by bringing more property finance loans to the marketplace. We’ve created Funding Circle Property Finance Limited, a subsidiary that will mirror Funding Circle Recoveries Limited. It will be used for holding security of property finance loans.

We’ve also had some feedback from borrowers about the name of “Funding Circle Recoveries Limited” (FCRL), which currently holds security on borrowers. This name is on a public record and borrowers have told us that “Recoveries” in the name may suggest that the borrower has been in financial difficulty when this is not actually the case. We’re changing the name to Funding Circle Trustee Limited (FCTL) as it is better suited, since it reflects the fact that the company is predominantly a security trustee.

3. Getting ready for regulation

From April, the peer-to-peer lending industry will be regulated and we are starting to make small changes now so we’re on course to comply with regulation. One such change is formalising the handling of fair complaints, which is an operating principle set out by the P2P Financial Association.

These changes will be reflected in the updated Loan Conditions, as well as the Terms & Conditions for investors, borrowers and intermediaries. It’s important to have a look, as by continuing to use the Funding Circle marketplace you agree to be bound by these revised terms.

On Monday 17th February, before making a bid you’ll also be asked to re-accept the Loan Conditions.

Your 5 minutes with… the Credit Assessment Team

So far in this series, we’ve spent some time with members of two key areas of the Funding Circle team: the customer relations team and the insolvency team. Now it’s the turn of the team who make informed decisions about the loans you invest in: the credit assessment team.

The team has grown steadily over the past 3 and a half years, with Kevin starting in May 2010 (before Funding Circle had even launched) growing to 8 members today, who share over 80 years of experience between them within the credit and risk underwriting industries.

underwriters team interview

Day-to-day activities include:

Assessing applications from potential borrowers who come to Funding Circle for a business loan. This includes reading biographies of where a business is, where it has come from, and where it wants to be in years to come. With that information, coupled with our our in-house assessment model and external sources of data, the credit assessment team can then work out how we could help them get to where they want to be. As well as this, they have regular catch ups with the credit analytics team, including Andrew Mullinger (co-founder and Head of Credit) to update and refine our credit model, to identify trends and raise any suggestions or comments.

So let’s get a feel of who the team are and where they’ve come from… Can you all tell me a bit about your backgrounds?

Kevin: Sure, as you mentioned, I was the first employee at Funding Circle. We had no website, no credit scoring models, no procedures, nothing! I have over 17 years’ Credit Underwriting experience working for various banks and finance companies.

Craig: I joined in May 2013, having 5 years’ credit underwriting and deal structuring experience. I’ve done quite a range of underwriting including property and shipping finance.

Penny: I only joined last November, but have 15 year’s experience and an asset finance background at ING.

Duncan: I became part of the team in August 2012, having 12 year’s experience in credit underwriting; specifically in agriculture and construction finance.

Jas: I joined pretty early on in February 2012. Before this, I had 10 years in risk underwriting and was previously at ING.

Ari: I actually knew Jas from ING, and focused on asset finance. In total, I’ve probably got around 15 years experience too.

Louisa: I joined a bit before you Ari, wasn’t I? February 2013 I think. I have 5 years’ credit underwriting experience, in leasing and asset finance.

Sandy: I started last month and previously worked as a trade credit underwriter for 2 and a half years, having come from Sydney where I worked as a mortgage insurance underwriter.

So it seems you all have a variety of backgrounds, and many years of experience! Do you think that helps with the decision making here?

Kevin: It definitely helps. Our team have a wide variety of experience, gained across several areas and while we do seek opinions from others, we try to ensure that all underwriters review applications across the whole spectrum.

Penny: It helps, yes. If you’re not 100% sure of something, then nobody has a problem with you passing it on or asking for some input. We all work together, and because of the range of businesses that come through to Funding Circle, it’s great that everyone is accessible.

And what would you say the common goal for the team is?

Kevin: I’d say it’s really to acquire well measured risk in a fair, prudent and accountable manner.

Craig: We’re guardians of peoples savings but we’re also investing in the future of businesses. Overall, I’d say we’re here to lend as much money as we can, in a sustainable and responsible way.

Duncan: Yes, and we hope to change people’s lives for the better.

Louisa: Definitely. We want to encourage the right type of business and protect investors’ money.

Yeah, it’s definitely important to reach that balance. So why did you decide to work at Funding Circle?

Duncan: I wasn’t happy at my old job. A recruiter called me, so I met Andrew and immediately I was sold! I joined when the company was a lot smaller and the business hadn’t massively taken off, but Andrew completely sold it for me.

Kevin: It sounds a bit sycophantic, but as soon as I met the three co-founders, I knew that Funding Circle would be a success (remember I joined before we launched). Looks like I was right!

Sandy: I think the concept of peer-to-peer lending is brilliant. Funding Circle has a platform which is able to provide a win win situation for both borrowers and investors, and we’re the industry leaders which is even better!

Craig: I wanted to work at a company where people liked working and people believe in what we do. I think a lot of the negativity in finance comes from legacy issues, like what happened in 2008 for example, whereas we don’t have the legacy issues here, and we love having our name in the newspaper!

Louisa: I wanted a change and thought this would be a great opportunity to grow with a company, and without sounding too clichéd I thought it looked very exciting!

Do you think any of our processes differ to other institutions you’ve worked at?

Kevin: I helped to design some of our processes, so there are similarities with others I have experienced. I think the biggest difference is that we are not risking our own money, but that of our investors, so we have to be extra vigilant.

Duncan: Our speed sets us apart I think. Other places take 6 weeks to make a decisions, where as we can get a decision out within 48 hours which is incredible for businesses, and also brings plenty of lending opportunities to investors.

Ari: I’d say the process has a general look and feel of everywhere else that I’ve been, but there are some improvements that can be made which we’re working on.

Jas: There’s not a lot different, the systems weren’t in place when I joined but we’re getting there. Generally I’d say we’re fairly inline with industry standard.

You must have seen hundreds, if not thousands of applications now. Has anything surprised you about the types of businesses that come to us?

Louisa: Not really surprising, but the average business tends to be well established; having weathered the last 5 or 6 years.

Ari: They are the “S” in “SME!” Usually husband and wife teams, generally asking for about £70k.

Penny: I’d call them lifestyle businesses. I used to see a lot of the same deals coming through in my previous company, but here – anything goes!

Sandy: Exactly. They’re typically SME family lifestyle businesses, so you know that they have a vested interest in making their business work, which provides some comfort when looking at their applications.

Craig: For me I think it’s the cross-section of businesses that we see, I mean it really could be anything.

Duncan: Anything could come through the door, from high street shops, to newsagents, to filmmakers, to hot tub manufacturers.. The list is endless.

Kevin: Not really. I have been doing this for a long time, and have seen many strange things.

That sounds interesting! Go on..

Kevin: We had an application where the company bought some land somewhere in Africa for £10,000 but had revalued it at £57 million in the accounts.

You’re right, something does sound amiss there. What’s your favourite thing about working at Funding Circle?

Jas: For me, it’s the people, everyone is really genuine.

Penny: I agree, it’s a nice place to come in to. They’ve also been very flexible with my childcare needs. Everyone is accessible and is happy to hear from you.

Ari: It’s also the people for me, it’s a great place to work, you don’t get the blues about waking up in the morning and we’re in early and stay late.

Craig: People are happy to be here. I don’t rush home at 6pm, I’m happy to continue working.

Kevin: I love the buzz and the energy. The people are generally young and vibrant, and being the oldest employee, I find it is infectious.

Louisa: Yeah, there’s a real positivity everywhere. We’re all excited about where the company is going.

Sandy: The dynamic and fresh culture. The people at Funding Circle are such a cool bunch and are really friendly.

Duncan: It’s nice to work somewhere where you are valued and the staff do matter. Everyone has a voice.

And what would you say the hardest part of your job is?

Ari: I love working here but the hours can be long.

Jas: Leaving work on a Friday afternoon!

Kevin: I think it’s remembering everybody’s name. We are growing so fast that I lose touch.

Craig: Trying to predict the volume that’s going to come in as it’s moving so quickly. Also, dealing with businesses who we’ve rejected is pretty tough, as rejection is always going to be taken personally.

Penny: I’d say seeing businesses, or their applications, that are just not quite there yet. You want to help them but you always have to remember that investor’s money is at risk. So I guess finding that balance is tough.

Louisa: You can sympathise with the company which really does need financial help, but we just can’t get them there.

So aside from Funding Circle, what other interests or hobbies do you have?

Louisa: I love doing anything outdoors, like running and hiking. And I enjoy going out in London with friends.

Penny: Looking after (and running after) my 5 year old son!

Duncan: I really enjoy cooking.

Sandy: I enjoy boxing and yoga.

Kevin: I love football, and played for many years at various levels, but now it’s confined to watching from my armchair.

Jas: At the moment, its managing an ongoing and overrun building project: my house. We started 10 months ago and it’s still not finished!

Oh no, I’m sure a lot of people can sympathise with that one. Thank you all for your time, I know you’re all keen to get back to reviewing loans so let’s finish with this one. Do you have any interesting facts that you wouldn’t mind sharing with us all?

Penny: I’m really scared of heights but I managed a bungee jump. I don’t think I’d do it again, as I’m sure I fainted at the top.

Duncan: I nearly became a chef and instead opted for underwriting.

Craig: I can juggle wine bottles.

Kevin: I did have an almost encyclopedic knowledge of 1970’s pop chart music.

Jas: Ari and I were once in a TV advert. It was for the National Lottery and there were some hilarious hairstyles going on.

Ari: Yes, we were. And Jas showed everyone the clip before I had even joined. Thanks Jas!

Excellent, I’m sure we can dig out that clip if enough people want to see it. And Duncan, why don’t you start a Funding Circle “Bake Off”, I’m sure there would be plenty of eager participants.

We’ll be spending our next 5 minutes with the credit analytics team, so stay tuned for our next installment.


Introducing the Funding Circle iPhone app

We’re excited to announce that from today, you’ll be able to download the Funding Circle App to use on your iPhone.

The app, free to download from the App store, will allow you to bid when you’re on the move, help you keep track of all of your bids and notify you when loan requests you’re interested in are coming to an end.

As well as this, there are some useful features like the auto login, which means you don’t have to login to your account every time you open the app on your phone. Safety is important to us which is why you can’t deposit or withdraw funds using the app, so if your phone was to get into the wrong hands, you can rest assured that your money is safe.

You may ask, why have we chosen Apple’s iOS over Android for our first app? The reason is simple: our usage data shows that visits from iOS devices, including iPhone and iPad, outweigh Android users significantly, specifically by 7 to 1 for the whole of October. That said, we do have a desire to launch an Android app, and the iPad App will be released shortly.

As this is the first version of the app, you may notice some features missing that you would expect to be in here. We will continue to add functionality with every release and we’d appreciate your input on what you think would be important to include in future releases.

The app is also intended for existing Funding Circle investors only, so if you haven’t yet created an account to lend to businesses, you can so do here.

The guide below shows you the key sections of the Funding Circle App. Don’t worry, it is really easy to use and and you’ll soon be making and tracking bids whenever and wherever you like.










 Download the Funding Circle App.

Your 5 minutes with… the Insolvency Team

Following our first team interview where we spoke to Jenah and the rest of the Customer Relations team, we thought we’d spend 5 minutes with Andrew and Susie, who work on the insolvencies and recoveries of Funding Circle businesses.

aj and susie

A small proportion of businesses will be unable to maintain repayments on their loans and become insolvent so we thought it was important for you to meet some of the people who are dealing with these cases on your behalf.

Andrew is Head of Insolvency and Susie is our Insolvency Administrator. We are growing this team and expect a further two members to join them by the end of the year. Andrew started in the summer and Susie has been with us since November last year.

Day to day activities include:

Checking in on businesses that have fallen behind with repayments, working with borrowers and guarantors to establish a fair payment plan (if required) that protects the interests of investors, notifying investors of the status of late payments, ensuring that agreements with borrowers are in line with our internal policies (which may change from time to time), developing policies and using technology to optimise our activities.

What is your background?

Andrew: I’ve been a qualified solicitor for 9 years now. Initially I studied biology at Oxford, and then took conversion exams to become a solicitor. In my early legal career I worked for a charity, the Government, and the NHS and then in corporate restructuring. As the recession hit, I moved from solvent reorganisations to insolvent reorganisations, Blockbusters and Halliwells to name two.

Susie: I have a completely different background to Andrew, I actually came from a travel agency in London, where I was in customer relations and also worked as their internal auditor.

So why did Funding Circle appeal to you?

Susie: When I joined, there were half the number of people and probably half the number of businesses, but I could see Funding Circle was expanding rapidly so the opportunity for development was there. The company has also been very accommodating to flexible working, so that’s helped a lot.

Andrew: Funding Circle is an incredibly exciting and innovative business. My role at Funding Circle is also quite different to what I have done in the past. Previously, I was a solicitor with clients and now I am business manager with legal knowledge, which can be very helpful. When I instruct lawyers and insolvency practitioners, I know what they’re doing and I also know what to expect.

Why is what you do important for our customers?

Andrew: It’s important for investors to know that we work very hard to maximise recoveries for them, whilst also trying to be fair to businesses and to give them a chance to get back on their feet. We look at the same factors in every case and have the same requirements from businesses, the main requirements being transparency and regular communication. However, every case is unique. From a borrower’s perspective, it’s important for them to know that they are dealing with fair and reasonable individuals who want to work with them to get the best result for all.

Susie: Yes exactly, and each case is different. You’re working for the benefit of both investors and businesses. Whilst we want to secure the maximum recovery for investors, we also want to show empathy towards the borrowers and make the right decision for all parties involved.

There is risk with lending and inevitably a small proportion of businesses will struggle to keep up with their repayments, but what do you consider to be the best outcome if this happens?

Susie: It’s a good result when we have achieved a recovery that works for both parties; the investors get their money back and it is affordable for the borrower.

Andrew: The best outcome is 100% recovery and a surviving business! But other than that, a good outcome will only come from great communication with the borrower. When there’s two-way communication, you can really understand their position which gives us flexibility to find an affordable solution that meets everyone’s needs. Ideally this will also help the individuals carry on running their business, having come out of the financial difficulty they previously saw themselves in.

And what is your favourite thing about working at Funding Circle?

Susie: The buzz in the office; everybody is busy and it’s a great environment to work in. It gets you out of bed in the morning!

Andrew: The way that everyone is committed to not only making their own teams the leaders in their field, but that everyone shares the vision of where this business is going. It is very impressive and not something I’ve come across before in my working life.

And what is the most difficult part of your job?

Andrew: Leaving in the evening!  Seriously though, sometimes we have to make very difficult decisions and it’s not easy when you think about the impact those decisions might have on people. Leaving those decisions in the office when I go home is the most difficult part of my job, but fortunately my wife is a good listener.

Susie: Speaking to business owners who have tried everything to turn their business around but are still unable to find the money to meet their repayments.

Yes, that definitely must be tough. On a lighter note, can you tell us an interesting fact about yourself?

Andrew: I was bitten by a seal in the Galapagos Islands. I’d been snorkelling and as I got back into the boat, a seal bit my knee. It didn’t hurt at all, it was a friendly nip!

Susie: As we’re talking about animals, I was stung by a hornet when I was younger and remains as one of my most vivid memories. The hornet was huge!

Ouch! That sounds nasty. And aside from run-ins with various mammals and insects, what other interests do you have?

Susie: I enjoy socialising with my friends, without my kids! I also enjoy running as it gives me time to process my thoughts.

Andrew: Illegal raves in Vauxhall… I wish.  I’m quite boring really – I like cooking, reading and hanging out with my wife and two daughters.

From the Galapagos to Vauxhall, very interesting! We’ll finish on this one, do you have a favourite city?

Susie: London, without a doubt. You’re going to say something abstract aren’t you Andrew?

Andrew: St Petersburg! The Hermitage in St Petersburg is awesome, and they have a mini version of St Basil’s Cathedral down a little alleyway, which is very atmospheric.


Your 5 minutes with… the Customer Relations Team

The Funding Circle community has been growing steadily over the past three years and with it, so has the Funding Circle team. More than 70 people now work at FCHQ in London so we thought it was about time that we introduced the team to our community.

We’re starting a regular feature where we’ll spend 5 minutes with members of each department, including the product, technology, marketing, credit risk, recoveries and sales teams to gain some insights about their day-to-day activities. To kick off the series we’re with the customer relations team, headed up by Jenah.

cs2 (2)

A brief overview of the Customer Relations team

There are currently 5 team members: Jenah is Team Leader and was Funding Circle’s second employee, having started in June 2010. Clare joined in April 2012, followed by Elaine and Ben in December 2012, and most recently Melissa, who joined in July this year. Ben is affectionately known as Wilko, to distinguish him from all the other Bens in the office!

Day to day activities include:

Answering enquiries from investors via email and telephone, allocating and reviewing all inbound and outbound payments, identity checks to onboard customers and liaising with different teams to resolve problems, relay feedback and provide investor input for new products.

Jenah, why is what your team does important for our customers?

We’re the point of contact between investors and Funding Circle, so you could say that makes us the face of the company. It’s essential in our role to have a broader understanding of how our business operates, which is why we undertake operational tasks as well as providing customer service. Ideally, this means that whatever query you have, the first person you speak to will be able to assist you and you’ll never need to be passed on.

Why did you decide to work at Funding Circle?

Jenah: When I started, there wasn’t even a website! I really liked the concept and I thought it was a great opportunity to get involved in a company from the beginning.

Clare: Funding Circle was really appealing as I saw a fast-growing company and within it, huge potential for career development.

Elaine: I thought it was an interesting concept and was amazed at how far the company had come in such a short space of time.

Wilko: It’s a start-up and has all the fun that comes with it; the people are great and I believe in what Funding Circle stands for.

Melissa: It looked like a fast-paced and dynamic company, which is refreshing and completely different from my last job!

What’s your favourite part of working at Funding Circle?

Elaine: The team spirit. Everyone works really well together.

Wilko: I agree, everyone is approachable and always happy to spend time with you.

Melissa: Yes, me too, the people!

Jenah: I like that it’s a young, vibrant company. The team are great and there’s a real sense of comradery.

Clare: Definitely the people! We have monthly bonding outings with the whole team which are always a lot of fun.

And what would you say is your favourite part of your job?

Clare: Speaking to a customer who you’ve built up a rapport with. It’s rewarding when you’ve helped someone from the beginning, to then seeing how their account is progressing and hearing how much they enjoy using the site.

Jenah: Yes, it’s nice that the company is still small enough to allow you to build and maintain relationships with customers.

Elaine: One investor even sent us a postcard which said “Keep up the good work!”

It must have been nice to have received that! Have there been any other memorable customer experiences?

Jenah: We’ve received funny pictures in the past. Investors have emailed pictures of the view of where they’re writing to us from!

Wilko: Yea, we’ve also received Christmas cards which was lovely!

Elaine: I enjoy making general chit chat with people. I’ve been given pub recommendations for the Blackfriars area, and I’ll happily talk about Ireland!

What would you say is the toughest part of the job?

Jenah: In many situations we’re the middlemen and issues are out of our hands. Say for example there’s a technical problem: on one hand, we’re managing investor expectations and on the other, we’re working to prioritise it with the tech team. We’re limited by external restraints and processes, rather than our own capabilities.

Melissa: I agree, it’s most difficult when things are out of our hands and you need assistance from other teams to be able to do your job.

Clare: Yes, I’d say managing expectations and also dealing with investors who have experienced higher than expected levels of bad debt. Even though it is a risk-based product, inevitably some people will do better or worse than others.

Elaine: We’re still quite a small team so there’s always a prioritisation struggle; if there’s been a technical issue and no repayments have run overnight, it will take priority over a broken account link.

So it sounds like you have to be very people oriented and have good interpersonal skills. Are there certain things that you would pride yourself on in those situations?

Elaine: Yes, as a team we’ll always put in the work, regardless of how long it takes and we’ll do as much as we can when an issue is raised.

Clare: I think clear communication and transparency is crucial.

Melissa: Being patient is also up there!

Wilko: Yes agreed, and having the skills to problem solve.

And aside from Funding Circle, what interests do you all have?

Jenah: I enjoy yoga, reading and I love animals!

Elaine: Cooking, drama and swimming.

Wilko: I could talk about ice-hockey all day. I love it!

Clare: Socialising and playing netball.

Melissa: I am completely addicted to coffee.. When the coffee machine breaks it’s an absolute nightmare. I also enjoy running.

I’m sure the whole team can sympathise with that. Are there any other interesting facts you’d like to share?

Elaine: I’ve worked in a meat factory despite being a vegetarian.

Wilko: We’ve been (unofficially) voted FC’s most attractive team!

Clare: I’d like to think I invented the cava – pineapple cocktail aka, the “Wineapple”…

Ok, I won’t ask..

Which Funding Circle team would you like the next 5 minutes to be with?


Introducing net returns and diversification data


We want lending at Funding Circle to be as straight-forward as possible so we’re always looking for ways to improve the information we provide you. Having spoken to many investors over the past few months, we can see there are some valuable changes we can make:

  1. Displaying net returns after fees and bad debt: to show an average across all investors and also showing individual net returns in your account.
  2. More information on the distribution of net returns across investors and how these returns vary by level of diversification: allowing you to compare the returns for those investors lending to a handful versus those lending to hundreds of different businesses.

This new information will not only help you make more informed lending decisions, but make it simpler to track the returns you earn as a result. We’re part-way through these changes and you’ll see them across the site in the coming weeks, but in the meantime we wanted to share a preview with you.

The average net return (after fees and bad debts) across all investors who have been lending for more than 180 days currently stands at 6.2%. 75% of investors that are lending to at least 100 businesses (with a maximum exposure of 1% of their total lending to any one business) have earned more than 6% net per year. The charts below show the distribution of net returns for investors who have lent to a least 100, 50 or 10 businesses with a 1%, 2% or 10% maximum exposure respectively.

You can read more about the net returns and diversification calculations, the methodologies used and their limitations in our post on the Funding Circle forum, together with comments from other investors.





– See more at: https://www.fundingcircle.com/about-us/our-blog/introducing-net-returns-and-diversification-data#sthash.IkS8CKA6.dpuf

What you need to know about borrowing at Funding Circle

If you’re thinking of taking out a business loan through Funding Circle, cast your eyes over this first to make sure you have all of the information you need. These details are available on our website but we thought you might find this guide useful.

Who can apply for a loan?

Our aim is to help established and creditworthy businesses with access to finance. Limited companies, limited liability partnerships (LLPs) and non-limited companies that have been trading for at least 2 years  can apply. 

What do we look for when we make our decisions?

You’ll need to submit an online application which can take as little 10 minutes to complete. We will also require you to email your most recent filed or formally prepared accounts, your last 3 months of business bank statements and up-to-date management accounts. When making their decisions, the credit assessment team use in-house models which capture the information you provide to us as well as information from credit bureaus (for example, Creditsafe) including your past and current credit score.

Types of loans we offer

We offer business loans from £10,000 to £1,000,000, over a 6 month, 1, 2, 3, 4 or 5 year loan term. Loans have a fixed rate and a fixed monthly payment. The level of security required depends on the loan value and the purpose of the loan. Most loans require a personal guarantee, a security over a specific asset, or security over all of the assets in the business.

Loans from £10,000-£500,000 are generally unsecured. This means they don’t require business assets as a security. However, a personal guarantee will be required from director(s) in almost all circumstances. These are highly flexible and can be used for a wide range of purposes, including working capital, expansion capital, asset purchase and more.

Loans from £500,000 – £1,000,000 are generally secured. This could be an all asset security, where we take a charge over all assets in the business (sometimes as a second charge), or a specific asset security.



Please note that a personal guarantee from the director(s) may be required in any of the circumstances above.

Who’s lending to me?

Funding Circle has a broad community of investors, including over 85,000 people, local councils and financial institutions, all looking to lend to small businesses. When your loan is approved, it could be funded by lots of individuals all lending small amounts, or by one organisation. We’ll handle everything for you so you never need to speak to them directly, but you’ll have the knowledge that there’s a community of thousands backing your business.

What’s the interest rate?

If your application is successful we’ll give you a fixed interest rate as part of your offer. Your interest rate will depend on our credit assessment and the term of your loan. Typically the longer you want to borrow for the higher the interest rate, but the lower the monthly payments. 

What fees do we charge?

You will pay a one-off completion fee when you take out your loan. If you are not happy with your offer that’s absolutely fine; you are not obliged to accept the loan offer and no fee is charged.

How are the repayments structured?

Repayments are made in equal monthly instalments over your chosen time period. We will need you to set up a direct debit to ensure payments come in on time for the investors who lent to you. If you want to pay off your loan early, there are no fees for full early repayment. All we ask is that you pay the outstanding capital and interest that is due for the month of repayment.

Can I apply for a multiple loans?

Applying for a second loan is easy. Simply login online and complete the short form, or contact or team. To apply for another loan, you’ll typically need to have made between 3 – 6 repayments on your existing loan, although each application is treated on a case by case basis. You can also consolidate your existing loan at the same time. 

If you’re interested in taking out a business loan at Funding Circle, you can have a look at the website for more details, or you can start the application here.

If you are unsure about any of the above or would like to discuss your options, our team are more than happy to help. You can give them a call on 0800 048 2467 and press option 2 for the business team.


10 exciting developments to expect from Funding Circle in 2013


This year is already shaping up to be an exciting one for the Funding Circle community. With 2013 officially underway, we thought we’d share with you some of the more interesting developments that will affect your experience on the marketplace.


The £100 million milestone

A major milestone for the marketplace is quickly approaching: £100m in loans funded on Funding Circle. At the time of writing this, we are just about to cross the £70 million mark. Our expectation is that we will pass the £100 million milestone sometime in the first half of the year, can you predict when?


Government funds start being invested

We announced in December that the Government will be investing £20 million through Funding Circle. The funds should become available for investment in the next few months. We’ll keep you updated on when this happens.


Regulation of the Peer-to-Peer industry commences

Consultation on the Financial Services Bill will begin in January, which is the first step in the Peer-to-Peer finance industry becoming regulated. We welcome this move and the resultant regulation should see many benefits for organisations, borrowers and investors alike.


The Funding Circle community

We launched the new Funding Circle forum in December. The ambition, with your help, is for it to become a valuable resource for anyone investing or borrowing on Funding Circle or anyone thinking of doing so. We’ll also be growing our presence across the major social channels so you can engage with us on the platform of choice. We’re currently on FacebookTwitter and our own blog. Look out for our new presences on Google+ and Pinterest in the near future.


Secondary loan parts market

We are currently reworking the secondary market to make it much more useable and dynamic, with a lot of your suggestions coming to life in the new version. Based on some of the conversation on the forum, it appears that these will be welcome changes for the investor community.


Sole trader finance

We have always experienced a strong demand for the marketplace to offer loans to Sole Traders . We have been exploring the option for a few months now so look out for more news on this pretty soon.


Asset finance review

We are reviewing our asset finance product to create more opportunities on the marketplace for both borrowers and investors. The product will provide additional security for our investors and offer businesses more financing options.


More investment data

We’ll be exploring ways of presenting more Funding Circle data on the forum, giving you more insight into what is going on in the marketplace and hopefully helping you become a more successful investor on the Funding Circle marketplace.


Description and listing pages

We are currently working on creating much clearer and easier-to-use business description and auction listing pages. In the coming year, we’ll look to give a similar makeover to all parts of the site.


iPhone and iPad apps

One of the more exciting projects for the year will see us developing iPhone and iPad applications to make it easier to interact with the marketplace wherever you are. We will also be looking to make our site a lot friendlier to use on smartphones and tablets.

What else would you like to see from Funding Circle this year? Tell us in the comments

– See more at: https://www.fundingcircle.com/about-us/our-blog/10-exciting-developments-to-expect-from-funding-circle-in-2013#sthash.Xu3sxFBy.dpuf

Making the most of your investment: Diversification

In the final post on our ‘making the most of your investment’ series, we’re looking at diversifying your investment.

At Funding Circle, you are in control of your money – you choose which businesses you want to lend to and how this is done. You also choose the level of risk you’re comfortable with for the return you’re looking for.

Part of lending through Funding Circle is choosing how you want to lend your money, and spreading amounts across lots of businesses to manage your risk. In the financial world, this is called diversification.

By diversifying and spreading your money to lots of different businesses, if any business is unable to fully repay its loan the impact on your overall return is reduced.

At Funding Circle, it’s easy to diversify. As an investor, there are two ways you can spread your money, whilst remaining in control and choosing the level of risk and return you’re comfortable with:

  1. Automatic lending. Our Autobid tool enables you to automatically place bids quickly and requires little management. You can set the maximum amount of money you want to be lent to any one business (from 0.5% of your total funds). So if you had £4,000 in your Funding Circle account, Autobid would lend a maximum of £20 to any one business.
  2. Hand-pick businesses. If you want to choose the businesses you lend to and focus on companies with characteristics you value, you can hand-pick the auctions you want to bid on. By choosing this option, you can also ask the business questions before deciding whether to bid.

If you are looking to rapidly lend your money out, you can buy loan parts directly from other investors. This takes place on our secondary market. To find out more information about this, click here.

Some people choose to diversify across hundreds of businesses to reduce their risk. By doing so any loss you experience will have a lower impact on your overall return. Every investor at Funding Circle who has lent no more than 1% of their funds to any business, and has been lending for at least 6 months, is currently earning a positive return.

Other investors like to spend more time reviewing and choosing individual businesses to lend to and will therefore lend to less businesses. This means any loss you experience will have a greater impact on your overall return, but the probability of experiencing a loss will generally decrease. Funding Circle allows you the control and transparency to choose the strategy that is most appropriate to you and delivers the maximum returns for the level of risk you are comfortable with.

We hope you have found the blog posts helpful over the last few weeks. If you have any questions please feel free to get in touch with us by leaving a comment below, or email contactus@fundingcircle.com.

The Funding Circle team

– See more at: https://www.fundingcircle.com/about-us/our-blog/making-the-most-of-your-investment-diversification#sthash.wQsbQuHB.dpuf

Making the most of your investment: Understanding your returns

One of the things people have told us they like about investing through Funding Circle is that it complements their other investments and offers attractive returns and less volatility than some other investment products, such as shares.

While shares can deliver attractive returns, they are volatile and won’t necessarily rise steadily over time. Facebook’s IPO and Google accidentally publishing its results early last week, which led to a 20% fall in its share price, are good examples. Funding Circle is different in that its return profile fluctuates less than shares.

FTSE 100 performance in the last 12 months


Illustrative Funding Circle performance over 12 months


As you can see from the graph above, the shape of your returns at Funding Circle will fall when you experience bad debts and increase again as other businesses pay you interest.

It’s important to remember that Funding Circle is not a savings account: it is a stable, risk-based investment. As an investor you should expect that some of the businesses you lend to will be unable to fully repay their loans – at Funding Circle we call this bad debt. Our current level can be found on our statistics page.

On the statistics page, we also provide estimated annualised bad debt levels so you can use these to calculate your expected net return. We estimate that you should expect a bad debt of 2.0% of your investment annually, although this will vary by the risk bands you lend to. These figures can help you calculate your estimated net return. In line with other risk-based investments, such as such as corporate bonds or gilts, we quote your rate as an average gross yield. The average gross yield is the return that you receive on your investment if you immediately reinvest all the monthly repayments (both interest and principal) you receive over the course of a year. This is before bad debt, our 1% annual fee and tax.

You can calculate your overall net return (before tax) by using this formula:


Unlike other peer-to-peer lending sites, where individuals lend to other individuals, relief from Capital Gains Tax is also available on loans which become irrecoverable at Funding Circle because you are lending to businesses. This is known as ’loss relief’ and even if you experience a bad debt, but do not use loss relief in the year it is incurred, it can be used in the future. You can read more information on our FAQshere.

If you do experience a bad debt, we will try to recover as much of your money as possible. We take security on more than 90% of all loans to ensure in the eventuality of a business not being able to fully repay their loan we have opportunities to recover the money. This includes personal guarantees, assets (such as coaches) and all-asset security (everything a business owns). Each recovery process will take a different amount of time to complete depending on each specific case. Whenever you experience a loss, we will communicate this to you and keep you updated on the recovery process within your account summary. You can read more information on our debt recovery processes here.

Next week, in our third post of the series, we’ll look at diversifying your investment.

The Funding Circle team

– See more at: https://www.fundingcircle.com/about-us/our-blog/making-the-most-of-your-investment-understanding-your-returns#sthash.2q2qqT37.dpuf

Making the most of your investment: Competitive bidding

As Funding Circle has grown over the last two years, we’ve seen thousands of people join, unlock their money and start lending to great British businesses. As we continue to grow we wanted to share with you some top tactics many members employ to make the most of lending at Funding Circle.

To do this, we will be publishing a series of short blog posts over the next three weeks. This week, we’re looking at competitive bidding, next week we’ll look at understanding returns and lastly we’ll discuss diversification.

Competitive bidding

As most of you will know, at Funding Circle people lend money to businesses via auctions. You bid the gross interest rate you want to earn and the amount you are happy to lend, and the lowest rate bids become part of the loan. So, your offer is successful depending on how competitive your bid is compared to other investors.

Popularity varies by loan request, but the number of bids placed can often increase significantly in the final few hours of an auction.

The graph below indicates how popular the final few hours of auctions can be. In this auction for £250,000, more than £1.1 million worth of bids were placed by investors with more than 70% of all winning bids taking place on the final day of the auction.

Percentage of loan funded by auction day – example loan, Sept 2012 %


Winning interest rate by day of auction – example loan, Sept 2012 %


If this has happened to you, a good way to manage this is to monitor your offer rates and check the interest rate you have offered is competitive and in line with the level of return you are looking for and the level of risk you are comfortable with. This will ensure you are successful as often as possible.

It’s also useful to remember that once a business loan is 100% funded, a business can choose to accept the loan early and approximately 40% of businesses choose this option. The majority will wait until the auction ends to see if the interest rate will fall. This means that if a business loan is 100% funded and still on the marketplace, you can place a bid at any point until the end of the auction. You do this by offering an interest rate lower than the maximum interest rate which you can see on the loan request page.

If you are unsure whether your bid has been successful, you can check the ‘My Bids’ summary page in your account. If you cannot see your bid and your available funds have increased, then your bid will have been knocked out of the auction. If you wish to re-bid check your new rates is sufficiently competitive, or if you’re using Autobid, lower the interest rate settings. We will be developing new tools to automatically let you know the state of your bids in the future.

We hope you found this post useful. We’d love to hear your feedback about what strategies you employ to ensure you maximise your return. Leave a comment below or get in touch at contactus@fundingcircle.com.

The Funding Circle team

– See more at: https://www.fundingcircle.com/about-us/our-blog/making-the-most-of-your-investment#sthash.SezxqtoB.dpuf