Chief Risk Officer’s Update – December 2018

Jerome Le Luel joined Funding Circle as Global Chief Risk Officer three years ago; bringing with him more than 20 years of experience in risk management. His previous roles include Global Head of Risk Analytics at Barclays Bank and Global Chief Risk Officer at Barclaycard. Jerome leads a team of more than 100 risk professionals across the four markets Funding Circle operates in: including data scientists, credit risk analysts and credit assessment experts. Their role is to help ensure you can earn attractive returns by deploying industry-leading risk management techniques and models.

In the first of a bi-annual series, Jerome will provide his view of what has been happening in the wider economy, and what this means for the businesses you lend to.

The economic environment has created favourable lending conditions

Investors lend through Funding Circle to small businesses in the UK, US, Germany and the Netherlands. Looking at these four economies in detail we can see that they have all recovered from the 2008 recession, with sustained growth in Gross Domestic Product (GDP) over the last four years:

1. GDP growth %, year on year

Source: Federal Reserve, ONS, OECD

In each of these markets, central banks have set historically low interest rates, making the cost of borrowing affordable and stimulating economic growth. Where interest rates have risen they have done so very gradually, to avoid triggering another recession:

2. Central bank interest rates

Source: Federal Reserve, BoE, ECB

This has resulted in strong levels of job creation and low unemployment rates:

3.Unemployment rate

Source: Federal Reserve, ONS, ECB OECD

This positive economic environment has created conditions that are highly favourable to lending. As a result, credit defaults for businesses have reduced significantly following the recession.

4. Small business insolvencies (Q1 2008 = 100)

Source: Paynet, Gov.UK, DESTATIS, CBS Statistics Netherlands

Across the US, Germany and the Netherlands consumer defaults are also at historic lows. However, the UK has seen an increase in the number of consumer insolvencies over the past two years:

5. Consumer insolvencies (Q1 2008 = 100)

Source: Federal Reserve, GOV.UK, DESTATIS, CBS Statistics Netherlands

This has been driven by a steady increase in consumer borrowing since 2013 as wages struggle to keep up with the cost of living. We haven’t seen this replicated in the UK small business space, as banks continue not to focus on small business lending. This can be seen below by the total outstanding stock of loans to small businesses, which is lower now than it was in 2011.

6. Outstanding loans to UK consumers and small businesses (£bn)

 
Source: BoE

However, the trends we have been seeing in the consumer space are having a knock-on effect on the overall insolvency rate of small businesses in the UK, which as we saw in graph 4, has risen slightly in recent months (although is still below pre-recession levels). For example some business owners—especially smaller ones—may be more reliant on personal credit cards than business bank overdrafts when managing the ongoing cash flow of their business.  

This trend looks to be isolated to the UK, with consumer and small business insolvency levels remaining low in the US, Germany and the Netherlands.

Loan performance has been strong

Investors lending through Funding Circle have continued to earn attractive, stable returns. Across our four markets, loans taken out since 2016 are projected to deliver returns of approximately 4 – 7% per year, after fees and bad debt.

Projected returns* after fees and bad debt, all markets

Source: Funding Circle

The consistency of these returns is reflected in recent lending commitments from some of the larger investors who lend through the platform. In addition to a new £150m funding facility from the British Business Bank (the UK government’s development bank), over the past few months two well-established institutions have committed to lend $1 billion and £1 billion to small businesses in our US and UK markets respectively.

US

We have seen consistent improvement in the performance of US loans since 2016. This has been driven by two key factors: an increase in the proportion of lower risk businesses accessing finance through the platform, and the increasing maturity of our risk models, now in their fourth generation in the US.

Projected returns after fees and bad debt, US


Source: Funding Circle

 

We have adjusted our pricing to reflect that base interest rates are rising faster in the US than our other markets, and loans originated in Q1-Q3 2018 are currently projected to earn investors 5.8% – 7.8% after fees and bad debt.

UK

Although the credit environment for small businesses remains strong, as mentioned the outlook for consumer credit in the UK has worsened in recent years. This has impacted a small population of loans in our higher risk bands who can be more susceptible to shifting trends in the consumer credit environment. These headwinds are reflected in the projected returns for our 2016 and 2017 cohorts, which are 5.4% – 6.3% and 5.2% – 6.2%.

Projected returns after fees and bad debt, UK

Source: Funding Circle

We regularly update and improve our assessment models, leveraging more than eight years of loan performance data, and we made adjustments in recent months to account for this. These include tightening some of our credit policies and deploying our latest risk model, incorporating data directly from an applying business’s bank. The loans that have been taken out following these adjustments are projected to deliver investors returns of 6% – 7% after fees and bad debt.

Germany

Since Funding Circle acquired a business in the German market towards the end of 2015, we have seen significant improvements in loan performance; supported by the implementation of learnings and best practices from our more developed markets.

 

Projected returns after fees and bad debt, Germany

Source: Funding Circle

Netherlands

We expanded into the Netherlands at the same time as Germany, and we have seen similar levels of improvement over the past few years. In both markets we have developed our in-house Collections and Recoveries capabilities, and are now seeing recovery rates at similar levels to the UK.

 

Projected returns after fees and bad debt, the Netherlands

Source: Funding Circle

This serves to highlight the self-improving nature of lending; the more businesses that access finance through lending platforms, the stronger and more predictive risk models become. This allows us to price loans with even more accuracy.

The outlook for the economic environment is encouraging

Across all of our markets we believe that conditions remain encouraging for small businesses. In the US the economy is on a strong trajectory, stimulated by recent tax measures that have provided incentives for businesses to make investments. Although the US economy may be closer to the end of the business cycle than the start, the fundamentals remain strong and the small business credit environment is likely to remain positive in the medium term.

In the UK trading conditions remain favourable, although Brexit is creating a degree of uncertainty. We can’t predict the outcome of negotiations between the UK and the European Union, however our stress modelling (see below) shows the UK loanbook is in a strong position to weather any potential economic fallout.

The economic recovery started later in Germany and the Netherlands, so there is likely to be further to run before the end of their business cycles. Both Germany and the Netherlands are export-oriented economies; they tend to sell more goods to other countries than they buy. This means there is the potential for some exposure to the rising political and international trade tension we have seen in recent years. However, overall we remain positive about the stability of the German and Dutch small business environment over the next few years.

We are confident returns will remain resilient through a recession

A deep understanding of credit risk, and first-hand experience of managing multi-billion pound lending portfolios—particularly through the 2008 recession—has taught me that although lending is cyclical, careful monitoring and a prudent approach can provide investors with attractive returns throughout every stage of the economic cycle. When downturns happen, defaults do increase. However, it’s important to remember the vast majority of borrowers should remain financially healthy.

At Funding Circle, we rigorously prepare for changes in economic conditions. Part of this is to regularly stress test the loans in each of our markets. To do this we take a base scenario**—the projected returns from loans being originated today—and using a bespoke stress testing model, apply a number of adverse scenarios recommended by each market’s central bank. This allows us to simulate what could happen to the projected returns established in our base scenario. Although every recession is different, the results show that even in severe economic conditions investors should still be expected to experience positive returns:

 

2018 Funding Circle stress test results

Source: Funding Circle Stress Test 2018.

These results assume that no action would be taken to mitigate losses in the event of a downturn. In reality, we carefully monitor loan performance for signs of stress. If there were signs that conditions were worsening, we would make adjustments to account for some of its effects: for example tightening our assessment process, or calibrating prices on new loans. These actions should mitigate some of the adverse impact on investors’ returns.

Although we can’t predict when and how the next recession will happen, my experience tells me that we are ready. We are originating resilient loans in all of our markets, and we have the right tools in place to mitigate economic stress if needed.

We hope you have found this information useful. If you have any questions, please don’t hesitate to get in touch, and remember by lending to businesses your capital is at risk.

Jerome Le Luel

*Projected returns as of 30th September 2018. The projected annualised return shows the return, after fees and bad debt, that loans are currently estimated to achieve. Loans are shown by the year they were taken out. The return is calculated by combining the actual annualised return received to date, and our latest return estimates, including expected recoveries, for the remaining term of loans that have not yet been fully repaid. Past performance is not a guarantee of future returns and by lending to businesses your capital is at risk.

**Base case scenario taken from projected returns of loans originated Dec 2018.

Disclaimer
This material contains certain tables and other statistical analyses that have been prepared by Funding Circle. Numerous assumptions have been used in preparing this statistical information, which may or may not be reflected in the material. The statistical information should not be construed as legal, tax, investment, financial, or accounting advice. The Information is provided as of the dates shown and is subject to updating and revision, and may change materially without notice. Subject to applicable regulations, no person is under any obligation to update or revise the information. The information may contain various forward-looking statements, which are statements that are not historical facts and that reflect Funding Circle’s beliefs and expectations with respect to future events and financial and operational performance. These forward-looking statements involve known and unknown risks, uncertainties, assumptions, estimates and other factors, which may be beyond the control of Funding Circle and which may cause actual results or performance to differ materially from those expressed or implied from such forward-looking statements. Nothing contained within the information is or should be relied upon as a warranty, promise, or representation, express or implied, as to the future performance of any loans. Any historical information contained in this statistical information is not indicative of future performance.

Introducing the Funding Circle Android app

We’re pleased to announce that from today, you will be able to download the Funding Circle App to use on your Android device. The app can be downloaded for free from the Google Play store.

The Android app will allow you to keep track of your Funding Circle account while you are on the go. It will offer you fast, secure access to your portfolio, including fingerprint sign-in functionality.

In the first version of our new Android app, you will be able to check how your portfolio is performing and view your account summary. For now, if you need to add funds to your account or change your lending options, please continue to do so by using your desktop device. We’ll be adding more functionality in the future, and as always we appreciate your feedback to make the app as simple and easy to use as possible!

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

Enjoy lending,

The Funding Circle team

Helping more investors build a well-diversified portfolio

At Funding Circle, we want you to earn attractive, stable returns by lending to UK businesses. To help you achieve this, we suggest that investors diversify their portfolios by lending small amounts to lots of different businesses.

We want every investor to benefit from a well-diversified portfolio and have a positive lending experience. As part of this, we have decided to change the minimum amount you can lend to each individual business from £20 to £10.

Helping investors with smaller portfolios diversify

Our automatic tool lends no more than 0.5% of your portfolio to any individual business. This means that if one of the businesses you lend to is unable to repay their loan, only a small amount of your portfolio would be affected. Spreading your risk in this way helps you earn a more stable return.

By reducing the minimum loan part size to £10, more investors will be able to build a well-diversified portfolio. Every new investor who lends £2,000 or more will now lend to at least 200 businesses. Lending just £1,000 (the minimum initial transfer) now allows investors to lend to at least 100 businesses, which we believe provides a strong level of diversification. For example, 93% of investors who have diversified like this for at least a year are earning 4% or more.

Please note your existing loan parts will not be affected and this will only affect new loans you lend to. If you lend more than £4,000 you will see no change as our lending tool will lend more than £20 (0.5% of your portfolio) to each business. By lending to businesses, your capital is at risk.

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

Enjoy lending,

The Funding Circle team

Add funds to get an iPad

For a limited time only, you’ll get a gift when you add £15,000 or more to your Funding Circle account!

What gift can I claim?

The gift you receive depends on how much you transfer into your account:

  • Add £30,000 to get an Apple iPad 32GB WiFi
  • Add £20,000 to get £200 John Lewis vouchers
  • Add £15,000 to get an Amazon Echo

What do I need to do?

Add enough funds to your account between 21:00 on Tuesday 16 October and 23:59 on Friday 16th November to get the gift you want. You also need to have lending switched on and keep the extra funds lent out until midnight on Wednesday 16th January 2019. We’ll then send your free gift to the address registered to your Funding Circle account.

Can I use my ISA and Classic accounts?

You can only claim one gift per person. If you only have an ISA account and have used up your ISA allowance, you can transfer existing ISAs you hold from other providers, or open a Classic account.

If you have both an ISA and Classic account registered to the same email address, you can split the extra funds between the two. However, if you withdraw from one and transfer to the other, you won’t qualify for a gift. We’ll look at the net amount added between the two.

If you’re transferring an ISA from another provider, we need to have received your ISA transfer form by 16th November for you to qualify.

Make sure your address is up to date

We will send your free gift to the address registered to your account. Please check your details are up to date by signing in to your account.

To claim your gift, sign in and add funds to your account today.  

For more information speak to our team on 020 7401 9111 or contactus@fundingcircle.com. Terms and conditions apply. By lending to businesses your capital is at risk.

Enjoy lending!

The Funding Circle team

Update to our projected returns

At Funding Circle, our aim is to allow you to earn attractive, stable returns by lending directly to a diversified portfolio of creditworthy businesses. As part of this commitment, we regularly review and update our assessment process and the interest rates at which you lend to businesses.

Following our most recent review, we have updated the projected returns we display for each lending option and will now show these returns as a range.

Introducing ranges for projected returns

The projected return is the annual return that a diversified investor could earn, after fees and bad debt but before tax, by lending to businesses through each lending option. To reflect there is an expected level of uncertainty when making predictions about loan performance we are introducing ranges for the projected returns.

What are the new projected returns?

Following our most recent review of our gross interest rates and taking into account the above, the projected returns for our Balanced and Conservative lending options are now:

  • Balanced – 6 – 7%
  • Conservative 5 – 5.5%

You can see more information on how the projected return is calculated here.

What other factors can affect your return?

It’s important to understand that your actual return may be higher or lower than the projected return shown for your chosen lending option. This can be caused by factors such as:

  • Actual performance may be higher or lower than projected – for example, more businesses may be unable to repay their loans if macroeconomic conditions were to change, such as during an economic downturn. In addition, the individual businesses you lend to may perform better or worse than projected.
  • The number of businesses you lend to – it’s important to understand that you are lending to your own individual portfolio of loans and not everyone will earn the same projected return. As your personal projected return depends on the loans your funds are matched with, the more businesses you lend to the better our lending tool will be at matching your funds to achieve the projected returns shown. Lending to more businesses also helps you earn a more stable return by reducing the impact of bad debt.
  • Your actual return is likely to change over time the projected return is the annual return you could earn once all loans have repaid and recoveries have been received from defaulted loans. It’s important to remember that bad debts do not typically occur evenly over the life of a group of loans, and it often takes time for recoveries to be made on defaulted loans. This means your return is likely to change over time. You can read more about this here.

Remember, by lending to businesses your capital is at risk.

Will this affect the businesses you lend to?

These projected returns only affect new loans made through the platform, and will not affect any loan parts you currently hold. We will review and if necessary, update the projected returns every three months. We display projected returns for the past five years of loans on our statistics page, and update these every three months.

You do not need to do anything and, by having lending switched on, you will continue to lend to businesses automatically. As always, you can change your lending option or pause lending via the lending settings page of your account.

If you have any questions about today’s news, please get in touch.

Enjoy lending,

The Funding Circle team

Introducing your new statistics page

At Funding Circle we are committed to providing you with access to easy to understand loan performance information. Today marks the next phase of this commitment as we launch a new and improved statistics page, which will be updated every three months and will provide you with a clearer and more accessible view of how loans are currently performing.

Exploring your new statistics page

Alongside our global lending figures, your new statistics page is designed to allow you to easily understand three key areas of information:

  • Lending – How much have investors in the UK lent to businesses?
  • Returns – How are loans currently performing in the UK?
  • Businesses – What kind of UK businesses are you lending to?

Providing you with the full picture of loan performance

The performance information we provide you on our statistics page uses our most up-to-date estimates, or projections. It’s important to remember that over an investment period there will always be some businesses who are unable to repay their loans. To reflect this, our projections are updated every three months using the actual performance data experienced so far. You can see an example of how this works in the chart below:


The projected return is the return we estimate loans will achieve over their lifetime. This is an annualised number and is updated every three months. It is calculated using the actual return received to date, plus the estimated return for outstanding loans that have not yet been fully repaid.

The return is shown as a range to reflect that the actual number of businesses who are unable to repay their loans could be higher or lower than estimated. As loans are repaid, the range of return shown will narrow and will be updated to reflect actual performance. Full explanations of all our statistics can be found in our definitions section on the statistics page.

Presenting you with data in a relevant format

It’s important that the data we provide continues to be presented in a way that’s relevant to investors’ needs. As part of this latest update we have withdrawn the downloadable loanbook.

While the loanbook was a useful resource for early-investors lending through Funding Circle, as the platform has grown and become popular with a broader group of investors, the number of people downloading it has fallen significantly. For example, approximately only 0.3% of investors downloaded the loanbook in the last month. It’s important that you are still able to access loan-by-loan information on the businesses you are lending to, which you can download from your Funding Circle account.

Validating our performance data

As part of our commitment to providing transparent loan information to investors, we have partnered with AltFi Data. AltFi Data are independent and well-respected industry experts with deep knowledge of online lending, and they will provide independent verification of the figures we provide to you. They will review the loan information every three months to ensure it is accurate and up to date.

If you have any questions or would like more information, please don’t hesitate to get in touch.

Enjoy lending,

The Funding Circle team

May Round-Up

Welcome to May’s round-up. This month we have usual stories and advice, plus thoughts on the Royal Wedding from a bridal boutique you’ve helped to fund. Read on below to find answers to more of your most asked questions, plus we look at bad debt, defaults and why you shouldn’t be afraid of them.

Business owner quote of the month

“This has provided a cash flow lifeline to my business, enabling me to fund new staff members and build my business” — Andrew.

Investor quote of the month

“I am really enjoying being a lender and love the way I can watch my investment grow” — Diane.

7 steps to planning your dream wedding

To celebrate the coming together of Prince Harry and Meghan Markle, we bring you 7 businesses to plan the wedding of your dreams. From finding the perfect dress to booking the ideal honeymoon, these businesses have all been able to flourish thanks to your lending.

With the wedding only a day away, we also spoke to bridal boutique and Funding Circle borrower Froufrou for their thoughts on Meghan’s dress:

“We’re hoping she goes more demure and stylish compared to the more traditional gown of Kate Middleton. We love the embellished gowns from potential designers Ralph & Russo, but whatever she chooses will be breathtakingly beautiful!”

Top 5 investor questions answered – part 2

Our investor support team are on hand to help with any queries you have about your account, how lending works or Funding Circle in general. Continuing from last month’s article, we have more of the answers you’re looking for in your top questions answered – part 2.

Bad debt, defaults and why not to be afraid of them

In this blog, we describe what these terms mean and discuss how you can reduce their impact to still earn a good return at Funding Circle. Find out more here.

April round-up

In case you missed, here’s our April round-up. In this blog you can find industry news, business success stories, your top 5 questions answered and changes and opportunities for the new tax year from Simon Read.

As always, if you have any questions or comments our dedicated team are here to help. And if you have any suggestions we’d love to hear them.

Enjoy lending, the Funding Circle team

April Round-Up

In this month’s round-up you can find industry news, business success stories, your top 5 questions answered and finally changes and opportunities for the new tax year from Simon Read. Read on below to find out more.

Trustpilot quote of the month

“We really like what Funding Circle are doing. From our initial enquiry, funds had cleared into our bank within 7 working days. We can now focus on growing our business. Thank you Funding Circle – for doing the work the banks should be doing!”

Bobbin Bicycles shows how to keep the export wheels turning

It’s great to see one of the businesses in our community featured in The Sunday Times, highlighting how selling overseas can help small businesses thrive.

Founded in 2007, Bobbin Bicycles supply a range of trendy leisure bicycles for everyday cyclists across the world. In 2016, they borrowed £250,000 through Funding Circle to buy stock for their new online sales channel. They’ve recently come back for second loan of £150,000 for working capital. Thanks to your support, we can continue to help small businesses, like Bobbin Bicycles, and push the economy forward.

Top 5 investor questions – answered

Our investor support team are on hand to help with any queries you have about your account, how lending works or Funding Circle in general. We spoke to the team to find out the most common questions you were asking. Here are your top 5 questions answered.

March industry news

In this issue, we discuss how technology has sparked a cultural shift within financial services, and how businesses are turning away from banks for financial support. Read more on this in our industry news.

A new tax year means new opportunities – Simon Read

To help you get the most from your finances, we regularly bring you a column from Simon Read, a personal finance expert. In this issue, Simon discusses how the new tax year can bring new opportunities.

March’s Lending Impact and Borrower Stories

In case you missed it, here’s last month’s post. In March’s lending impact we met Michaela, the founder of Arapina Bakery, in our latest case study video.

By lending to businesses, your capital is at risk.

As always, if you have any questions or comments our dedicated team are here to help. And if you have any suggestions we’d love to hear them.

Enjoy lending, the Funding Circle team

Your top questions – answered

Our investor support team are on hand to help with any queries you have about your account, how lending works or Funding Circle in general. We spoke to the team to find out what were the most common questions you were asking. Read on below to find the answers to your top 5 questions.

1. Can I move money from a Classic to an ISA account?

Unfortunately you can’t transfer either loan parts or available funds from your Classic account to your ISA.

ISA regulations state that investors can only make cash subscriptions into an Innovative Finance ISA. Instead, you must first sell your loan parts to other investors, then withdraw the funds raised into your nominated UK bank account. You can then transfer the funds into your ISA account.

Likewise if you have available funds in your Classic account, you are unable to transfer directly to your ISA. Again, you will have to withdraw and transfer in from your bank account.

The same is true if you want to move funds from your ISA to your Classic account.

2. Why can’t I sell all my loan parts?

Although the majority of loan parts will typically be sold within 24 hours, to ensure all investors are protected and treated fairly, we have specific rules and restrictions on which loans can be sold. Investors can’t sell loan parts that:

– Have had their risk band removed (for example when a CCJ has been registered against the business)
– Are late (currently behind on repayments) or are in default
– Have only one payment remaining

The first two restrictions are often temporary. If a business gets back on track with their repayments and there are no remaining issues, we can reinstate the risk band and the loan part can be sold.

As a result, investors can only sell loans that are in good health, which helps to protect the investors who buy them.

3. Why is my money not being lent out?

Our automatic lending tool is designed to help more than 70,000 investors lend their funds to businesses quickly and fairly. We have a dedicated team who monitor the balance between the supply of investor funds and demand from businesses. Liquidity has been excellent in recent months with approximately 97-99% of the total amount of investors’ funds lent out to businesses at any time.

It’s important that the remaining available funds are allocated fairly, so all investors have the chance to lend their funds to businesses. To help achieve this, the lending tool is more likely to match investors who have a large proportion of their funds available.

It’s worth noting that the lending tool will typically start matching your available funds once they reach 0.5% of your portfolio, and you will usually have a small proportion of funds not lent at anytime. Lending will be slower at weekends as new loans are only listed within working hours, but you may still purchase loan parts that are being sold by other investors.

In addition, if you are lending through our Conservative lending option, it can take longer to lend all of your funds out to businesses as you are only lending to our A+ and A risk bands, rather than across all businesses.

4. Why do I get negative interest at the beginning of lending?

This is a common occurrence when investors first start lending and is not a cause for concern.

When lending through Funding Circle, you will typically lend the majority of your funds to businesses who are taking out a new loan. However, you will also use some of your funds to purchase loan parts that are being sold by other investors.

As loan parts are often sold mid-way between repayments, it’s important that both the seller and buyer of a loan part receive the interest owed for each day they hold it for.

As a result, when you buy a loan part, you’ll pay the seller the amount of interest owed to them since the business last made a repayment. This interest will be taken from your available funds, and may show as a negative amount on your account total if you are just starting to lend. When the business makes their next repayment, you’ll receive a full month’s worth of interest.

5. Can I split my funds between Conservative and Balanced?

Only one lending option can be applied to your account at a time, so funds cannot be lent out using both Conservative and Balanced options simultaneously.

However, you could lend out half your funds using one option, then switch to the other and lend out the rest. This would split your funds across the two options, although any repayments would then be lent according to your current lending option.

If you’d like to change your lending option, you can do so at any time via the “Lending settings” tab.

More information can be found in our investor guide. Remember, by lending to businesses your capital is at risk.

Your April Review – Insight and Analysis

In March, you and other investors lent over £123 million to UK businesses, allowing them to achieve their business goals. Dive in below for your monthly analysis.

Last month, you helped over 1,800 UK businesses grow and take new opportunities — thank you for your continued support! Together we can continue to drive energy into the UK economy.

How Funding Circle is keeping the little guys in the loop City A.M.

“When I step into the lively hive that is Funding Circle’s office, it’s a breath of fresh air” says Katherine Denham, writer at City A.M. This article highlights our culture, our team and how our investors are supporting thousands of small businesses across the county.

These graphs show the most recent activity on our platform.

You’ve helped more than 10,500 small businesses access finance in the last 6 months…

 

Totalling over £701 million lent

March 2018 sector breakdown

Amount lent to each sector

March 2018 regional breakdown

Amount lent to each UK region

As part of lending to businesses, a small percentage will not be able to fully repay their loan. This is known as bad debt and is a normal part of business lending. We believe diversification, where you lend no more than 1% of your total to each business, is the best way to reduce the impact this has on your return. Our automatic lending tool will help you diversify by splitting your investment across lots of businesses. We suggest lending £2,000 or more, so you can lend to at least 100 businesses, with no more than 1% going to each one.  

Each week, we publish a list of the loans being defaulted on the Customer support section of our website under ‘Announcements.’ To see a breakdown of the loans defaulted last week simply click on loans defaulted 29th March 2018  For further information on why Funding Circle defaults loans you can read our FAQ here.

You can also read more about how our collections and recoveries process works (part one and part two) on our blog.

Up next in April we’ll be looking at the impact your lending is having on the UK economy and bringing to life some of the businesses you’ve helped access finance.

As always, if you have any questions or comments our dedicated team are here to help. And if you have any suggestions we’d love to hear them.

Enjoy lending, the Funding Circle team

*Data from CEBR report

This blog is a general summary, and should not replace financial advice tailored to your specific circumstances. Funding Circle is not authorised to, and does not, provide investment, tax, legal or regulatory advice. If you have any questions, please speak to your professional advisor or seek independent specialist advice.

March’s Lending Impact and Borrower Stories

In this month’s lending impact, we bring you our latest case study video featuring an award-winning bakery. We’ve also got your Easter weekend covered, with five booming businesses who can help you have a great weekend. Dive in below.

We’re pleased that so many of you are already benefiting from tax-free returns with the Funding Circle ISA. Thanks to your support, we can continue to help businesses take opportunities, create new jobs and drive energy into the economy.

Trustpilot quote of the month

“When others turned their back, Funding Circle helped us turn our dreams into reality. Thanks to their trust in us we are now able to expand our business and move things forward. We can’t thank them enough. If you wish to fulfil your business ambitions then there’s only one place to go, FUNDING CIRCLE!”


In January we introduced Michaela, the founder of healthy lifestyle bakery, Arapina. Originally from Crete, Michaela grew up eating natural and healthy home cooked food. After moving to London, Michaela’s passion for food led her to trade in food markets in 2013. She began with one single product – the Arapina chocolate cake – but as demand kept growing so did their menu. In May 2017, Arapina accessed finance through Funding Circle to expand their business and have since doubled their turnover. Watch the case study video to learn more about their exciting journey.

Make the most of your Easter break with friends and family

The long Easter weekend is nearly here! Here are five Funding Circle borrowers who can help you make the most of the long break. From visiting a chocolate factory to feeding the farm animals, there’s something for everyone. All of these businesses were able to flourish thanks to your support.

February’s Lending Impact and Borrower Stories

In case you missed it, here’s last month’s post. In February’s lending impact we met Jake, the founder of Bristol Bicycles. Additionally, we announced that the University of Huddersfield has lent to over 2,000 UK business through our platform. Finally, we listed five Funding Circle borrowers to keep the Winter Olympics spirits high.

Up next

At the beginning of April we’ll publish our Insights and Analysis blog to review March’s activity, including statistics from across the platform and helpful tips to make the most of your investment.

As always, if you have any questions or comments our dedicated team are here to help. And if you have any suggestions we’d love to hear them.

Enjoy lending, the Funding Circle team

Your March Review – Insight and Analysis

Last month you and other Funding Circle investors lent over £113 million to UK businesses to help them grow and develop. Dive in below for your monthly analysis.

We’re also very proud to announce we are 16th in The Sunday Times 100 Best Companies to Work For 2018. You can see the full list here.

In February, you and other investors helped over 1,700 UK businesses take new opportunities and reach their goals — thank you for your continued support!

Meet our Collections and Recoveries Team

Our aim at Funding Circle is for you to earn stable returns when lending directly to businesses. Dive into our Q&A with Andrew Jackson, Head of Collections and Recoveries in Europe, to find out how the team has evolved over the years to ensure the best possible outcome for you and other investors.

These graphs show the most recent activity on our platform.

You’ve helped more than 10,200 small businesses access finance in the last 6 months…

Totalling over 678 million lent

February 2018 sector breakdown

Amount lent to each sector

February 2018 regional breakdown

Amount lent to each UK region

LoansDefaultedLastWeek

As part of lending to businesses, a small percentage will not be able to fully repay their loan. This is known as bad debt and is a normal part of business lending. We believe diversification, where you lend no more than 1% of your total to each business, is the best way to reduce the impact this has on your return. Our automatic lending tool will help you diversify by splitting your investment across lots of businesses. We suggest lending £2,000 or more, so you can lend to at least 100 businesses, with no more than 1% going to each one.  

Each week, we publish a list of the loans being defaulted on the Customer support section of our website under ‘Announcements.’ To see a breakdown of the loans defaulted last week simply click on loans defaulted 1st March 2018  For further information on why Funding Circle defaults loans you can read our FAQ here.

Collections

HowItWorks

You can also read more about how our collections and recoveries process works (part one and part two) on our blog.

Up next in March we’ll be looking at the impact your lending is having on the UK economy. We’ll also bring to life some of the businesses you’ve helped access finance.

As always, if you have any questions or comments our dedicated team are here to help. And if you have any suggestions we’d love to hear them.

Enjoy lending, the Funding Circle team

*Data from CEBR report

This blog is a general summary, and should not replace financial advice tailored to your specific circumstances. Funding Circle is not authorised to, and does not, provide investment, tax, legal or regulatory advice. If you have any questions, please speak to your professional advisor or seek independent specialist advice.

February’s Lending Impact and Borrower Stories

In this month’s lending impact, find out how our partnership with Huddersfield University has helped UK businesses grow and develop. Next, meet the founder of Bristol Bicycles in our case study video and finish by discovering five Funding Circle businesses to keep you in the winter Olympic spirit.

GreatMonthFor

The University of Huddersfield has lent to over 2,000 UK business through its partnership with Funding Circle. In 2013, the university became the first to lend directly to businesses through the platform.

The partnership has created many opportunities for students through entrepreneurship scholarships. One of the many businesses to benefit from the university’s lending is Ushiwear, a British clothing brand owned by husband and wife, Neil and Jilly Kapusi. Read more on our blog.


Meet Jake, the founder of Bristol Bicycles. Ten years ago, Jake launched his own business, offering an affordable and high quality bicycle workshop. A few years on, Jake began designing and manufacturing his own line of bicycles and in 2015 launched Bristol Bicycles.

To support the growth of his business, Jake received expert coaching from Gary, a Business Coach at ActionCOACH. Having worked with Funding Circle for over 18 months, Gary recommended finance through Funding Circle to help boost cash flow and expand Bristol Bicycles further. Watch the case study video to find out how this partnership has allowed Jake to achieve his business goals.

Get into the Olympic spirit!

Last Sunday marked the end of the 2018 Winter Olympics, but the fun doesn’t have to stop there! We’ve put together a list of five Funding Circle borrowers to keep your spirits high. From synthetic ice rinks to ski and snowboard gear, all of these businesses were able to expand thanks to your lending. Dive in here.

January’s Lending Impact and Borrower Stories

In case you missed it, here’s last month’s post. In January’s lending impact we introduced the founder of Arapina and listed five businesses to help you stay in shape in 2018.

Up next

At the beginning of March we’ll publish our Insights and Analysis blog to review February’s activity, including statistics from across the platform and helpful tips to make the most of your investment.

As always, if you have any questions or comments our dedicated team are here to help. And if you have any suggestions we’d love to hear them.

Enjoy lending, the Funding Circle team

A thriving bike shop, thanks to you and ActionCOACH

Following his passion for bikes, 10 years ago Jake Voelcker took a leap and launched his own business: Jake’s Bicycles. His friendly and approachable workshop in the heart of Bristol offers affordable and high-quality service for all levels, from occasional riders to sports enthusiasts.

After a few years of strong growth, Jake saw the potential to inspire even more people to get into cycling. Through his experience servicing bikes and discussions with customers, he started designing and manufacturing his own line of bicycles with the goal to provide a comfortable cycling experience. In March 2015 he launched his own brand, Bristol Bicycles, entirely hand built and assembled in his workshop, offering the high attention to detail that mass production factories can’t replicate.

However, building a successful business is far from simple and external support was necessary to identify key focus areas. Gary, a Business Coach at ActionCOACH, has now been working with Jake for more than a year, providing guidance on how to develop the brand as efficiently as possible.

Based on the business evolution and Jake’s objectives, Gary quickly realised Bristol Bicycles needed a cash flow boost to grow. Having worked with Funding Circle for over 18 months, he did not hesitate to recommend us and was confident Jake would get a fast decision on his application.

Learn more about Jake and Gary’s experience using Funding Circle in the video below.

Since partnering in 2016, our relationships with the different business coaches from ActionCOACH has allowed many small businesses access more than £4 million in lending. We look forward to helping even more together in the years to come.

Are you interested in lending to businesses like Bristol Bicycles?

Lend alongside 77,000 investors and support small businesses across the UK by signing up online today. You can use our investor information guide to help you get started and there are thousands of loans which you can be a part of, making it quick and easy to build a diversified portfolio. Remember, by lending to businesses your capital is at risk.

Partner with Funding Circle

We work with a wide range of corporate and bank partners to help UK businesses access much needed finance. Email our Partnerships team at ukpartners@fundingcircle.com to find out how we can work together.

Your February Review – Insight and Analysis

YourFebReview

Last month Funding Circle investors, like you, lent over £117 million to UK businesses to help them grow and develop.

Dive in below for your monthly analysis and read the latest blog by Simon Read, a personal finance expert. With extensive experience in helping people making the most of their money, Simon discusses saving for your summer holiday.

JanLendingFigures

Last month, you and other investors helped businesses to take new opportunities, create new jobs and drive energy into the UK economy. Thank you for your continued support!

FebLendingBlock

Read between the lines: Saving for your summer holiday

Are the short nights and cold days making you want to book a holiday away in the sun? Dive in for Simon Read’s top tips for ensuring you can plan and save efficiently for the holiday you’ve been dreaming of.

MonthyTrends

These graphs show the most recent activity on our platform.

You’ve helped more than 9,700 small businesses access finance in the last 6 months…

 

FebVolume

Totalling over £650 million lent

 

FebValue

January 2018 sector breakdown

Amount lent to each sector

FebSector

January 2018 regional breakdown

Amount lent to each UK region

FebRegion

LoansDefaulted

As part of lending to businesses, a small percentage will not be able to fully repay their loan. This is known as bad debt and is a normal part of business lending. We believe diversification, where you lend no more than 1% of your total to each business, is the best way to reduce the impact this has on your return. Our automatic lending tool will help you diversify by splitting your investment across lots of businesses. We suggest lending £2,000 or more, so you can lend to at least 100 businesses, with no more than 1% going to each one.  

Each week, we publish a list of the loans being defaulted on the Customer support section of our website under ‘Announcements.’ To see a breakdown of the loans defaulted last week simply click on loans defaulted 2nd February 2018For further information on why Funding Circle defaults loans you can read our FAQ here.

Collections

HowItWorks

You can also read more about how our collections and recoveries process works (part one and part two) on our blog.

Up next in February we’ll be looking at the impact your lending is having on the UK economy and bringing to life some of the businesses you’ve helped access finance.

As always, if you have any questions or comments our dedicated team are here to help. And if you have any further suggestions we’d love to hear them.

Enjoy lending, the Funding Circle team

*Data from CEBR report

This blog is a general summary, and should not replace financial advice tailored to your specific circumstances. Funding Circle is not authorised to, and does not, provide investment, tax, legal or regulatory advice. If you have any questions, please speak to your professional advisor or seek independent specialist advice.

January’s Lending Impact and Borrower Stories

JanInvestorImpact

This month’s lending impact is all about kick-starting a healthy new year. First, we meet Arapina, an award winning bakery offering guilt-free sweet treats made from all natural ingredients. Next up, get in shape with five Funding Circle businesses who were able to grow thanks to your lending.

GreatMonthFor

This month we’re proud to announce we took home 3 awards at the AltFi Awards 2017. This included the coveted Editor’s Choice Award, as well as P2P Business Platform of the Year and Best Clarity of Data. With your continued support, we strive to grow our success even further in 2018.

JanSuccessStory
Arapina

Meet Michaela, the driving force behind the award winning healthy lifestyle bakery, Arapina. Originally from Crete, Michaela grew up eating locally sourced, natural and healthy home cooked food. After moving to London, Michaela found it increasingly difficult to find sweet treats that satisfied both her vegan diet and her taste buds. As a result, Michaela, or “Lady M” as she’s known, set up Arapina to offer delicious guilt-free treats made from the best natural ingredients.

Since 2013, their mission has been to carve a path away from the sugary, artificial produce found in many bakeries and instead offer people a healthy, yet delicious, alternative. Originally, Arapina traded with only one type of cake – the famous chocolate Arapina. As the years progressed and crowds grew fond of Arapina’s delectable delights, they decided to expand their menu. Today, their decadent cakes and desserts cater for all dietary requirements, including dairy free, gluten free and vegan recipes.

Thanks to your continued support, Michaela and the team were able to purchase new equipment after relocating into their own production and retail unit.

Stay tuned as we’ll be bringing you a behind the scenes case study video very soon.

Yoga, Pilates or Bodybarre? How will you stay in shape in 2018?

It’s that time of year when the decision to become fitter is top of everyone’s to do list. Many of the world’s most well-known and successful entrepreneurs consider yoga, pilates and other forms of exercise as an essential ingredient for their continued success. Head to our blog to discover five businesses to help you get in shape this year. All of these businesses were able to achieve their goals thanks to your lending.

December’s Lending Impact and Borrower Stories

In case you missed it, here’s last month’s post, where we met the founder of the Creative Whisky Company in our latest case study video and took a tour through small business past, present and future.

Up next

At the beginning of February we’ll publish our Insights and Analysis blog to review January’s activity. This includes statistics from across the platform and helpful tips to make the most of your investment.

As always, if you have any questions or comments our dedicated team are here to help. And if you have any suggestions we’d love to hear them.

Enjoy lending, the Funding Circle team

Yoga, Pilates or Bodybarre? How will you stay in shape this year?

The decision to become fitter is usually top of people’s new year’s resolutions and for good reason. Many of the world’s most well-known and successful entrepreneurs consider yoga, pilates and other forms of physical fitness as an essential ingredient for their continued success. These 5 local businesses are helping the UK get in shape, so where will you start?

Record your every move at Be X Fitness

Established in 2013, this Barnsley-based fitness center offers team workouts using high tech equipment so you can get the most out of your workout. Thanks to My Zone, the connected tracking technology, users can record their every move, analyse performance and receive personalised training advice from coaches.

running-shoes

To support growth, Kevin Yates applied for a business loan through Funding Circle in November 2017. They accessed £106,000 in less than one week, meaning they could take on the next opportunity quickly.

Physio by Pea Green to keep you energised

Stephanie Smith launched Oxfordshire-based Pea Green Physio back in 2008. Eight years on she decided she wanted to expand into yoga and pilates and needed a business loan to open a studio. Pea Green now offers yoga and pilates classes alongside sports massages and rehabilitation therapy after raising £25,000 through Funding Circle.

yoga-park

Rediscover fitness with Paola’s Bodybarre

Forget what you know about traditional fitness classes and embrace Paola Di Lanzo’s multidisciplinary workout methods. From light sessions focusing on technique, alignment and flexibility, to high intensity training and weight-lifting, the wide range of classes will help you find the exercise you’re looking for. After opening her first studio in Fulham in 2014, Paola’s BodyBarre is now available in 7 other pop-ups, affiliated studios and private members clubs around London. Paula expanded the business with a £53,000 loan to open a new flagship studio in Sloane Square.

Paola's Bodybarre Studio

Yoga gets you in the right headspace

The meditation classes at London-based Yogacentric are said to improve your mental focus by connecting your mind and body. If meditation isn’t for you and you’re looking for something more active, try their hot yoga or one to one sessions. All levels are welcome.

yoga-outside

Daniel Percival came to Funding Circle in 2016 as he wanted to grow his London studio. He secured £53,200 over 5 years to finance working capital and the fit-out of a second location.

Keep moving at Alderley Pilates

Jan and Peter Bowen founded their pilates business in Cheshire 15 years ago. The studio brings talented teachers and enthusiasts of all levels together in a friendly and relaxed environment. All of their trainers are certified by Body Control Pilates, the largest European professional pilates’ organisation.

pilates-workout

Alderley Pilates first came to Funding Circle for a business loan in 2014. Finance from Funding Circle has helped them refurbish their premises and upgrade their website to grow the business.

Make the most of your lending experience

Here are some of our key tips to help you get the most from your lending experience as a Funding Circle investor.

Set yourself up to earn a more stable return

Data at Funding Circle shows that investors who diversify by lending small amounts to many businesses are more likely to earn a stable return. To help illustrate this, the below chart shows the minimum annualised return earned by 95% of investors lending for at least a year, by the number of businesses they have lent to.

The chart shows that 95% of investors who have lent to at least 100 businesses equally for a year or more have earned at least 4% per year after fees and bad debt. In fact, since 2010 every single investor who has followed this level of diversification has earned a positive return. (Data correct as of 1st October 2017).

Becoming diversified has never been easier, as our lending tool automatically lends no more than 0.5% of your portfolio (subject to a minimum of £20) to each business. We suggest building a portfolio of at least £2,000 to help you lend to at least 100 businesses.

Check your Lending Settings are right for you

When lending through Funding Circle you can choose from one of our two lending options, Balanced or Conservative. Both options will allow you to quickly and easily build a portfolio of creditworthy businesses depending on your personal preference:

  • Balanced – lend to the full range of creditworthy businesses, aiming to achieve an attractive, stable return.
  • Conservative – focus on businesses that have been assessed as lower risk, but with a lower projected return.

It’s important that the lending option you have chosen is right for you. You can review and change your chosen option in the Lending Settings page when logged in to your account. This is also where we will display the current projected return for each option.

Boost your earning power with the Funding Circle ISA

The Funding Circle ISA is now available to all current investors (as of 3rd April 2018), subject to eligibility requirements. The ISA works just like your Classic Funding Circle account, but the interest you earn is tax-free. This could provide you with a significant boost to your earning power. For example, if a higher rate taxpayer lends £20,000 through the Funding Circle ISA and earns a one-year return of 7.2%* after fees and bad debt, their post-tax earnings after one year could increase from £864 to £1,440.

If you haven’t yet opened a Funding Circle ISA, you can do so by logging in to your account. Tax rules and relief can change depending on your personal circumstances, and you can find out more about the features and risks of lending through a Funding Circle ISA here.

Recognise bad debt as a normal part of lending

When lending to businesses there will always be some who are unable to repay their loan. We call this bad debt, and we account for it when calculating projected returns. Bad debt is rarely spread out evenly over the course of the loan term, and tends to happen during certain periods of a loan’s lifetime. You can see this from the chart below, which shows the annualised return, after fees and bad debt, earned by an example investor over a five year investment period:

In our example, based on five years of loan performance data, an investor lent £10,000 across all the loans originated through Funding Circle in 2012. Each month, the loan repayments and interest received were lent to new borrowers.

You can see that in this example most bad debt occurred during the period marked as phase 2, but then reduced as loans continued to mature and recoveries arrived. You can read more about how returns can change over time in our blog, but the important thing to remember is that a decrease in your return due to bad debt is an expected part of the lending experience, and will typically stabilise as your loans mature. Remember past performance is not a guarantee of future returns.

Think long-term

A modest regular contribution and a patient approach can have extraordinary results. For example, if you start with £10,000 in your Funding Circle account and set up a standing order for £100 a month, after 30 years you could have an account worth over £200,000**. Find out more about setting up a standing order, or see how your own portfolio could grow over time with this compound interest calculator.

It’s important to remember that as you lend to your own individual portfolio of loans your return may be higher or lower, and by lending to businesses your capital is at risk. Tax rules and relief can change depending on your personal circumstances.

We hope these tips help you get the most out of lending to businesses through Funding Circle. If you have any questions about your account, please get in touch.

Enjoy lending,

The Funding Circle team

*The projected return is an estimate of what investors could earn on the Balanced lending option (as of 10th January 2017), after fees and bad debts, but before tax. It uses the loans we expect to be funded on the platform, and the estimated bad debt rate of those loans based on our all-time loan data. See the full calculation here.

**Returns are based on the annual projected return of 7.2% for investors lending through the Balanced lending option (as of 10th January 2017). Returns are compounded monthly and are after fees and bad debt but before tax. Based on this, an account worth £10,000 with a standing order of £100 a month would be worth £213,837.61. Returns are calculated using a compound interest calculator.  

Your January Review – Insight and Analysis

YourJanuaryReview

In 2017, we helped over 10,000 UK businesses borrow over £1 billion. This year we want to do even better, helping businesses and investors achieve their goals, create new jobs and drive the economy forward. Here’s to a great 2018! Dive in below for your December review.

DecemberLendingFigures

Last month, you and other investors helped over 1,400 UK businesses take new opportunities and reach their goals — thank you for your continued support!

LendingFigures

December highlight: Small business infographic

Did you know there were more than 30,000 street sellers in London in the late 1800s? Was this the start of small businesses as we know them? In case you missed it, take a tour through small business past, present and future in our shiny new infographic.

MonthyTrends

These graphs show the most recent activity on our platform.

You’ve helped more than 9,300 small businesses access finance in the last 6 months…

Volume

Totalling over £630 million lent

Value

December 2017 sector breakdown

Amount lent to each sector

Sector

December 2017 regional breakdown

Amount lent to each UK region

Region

LoansDefaulted

As part of lending to businesses, a small percentage will not be able to fully repay their loan. This is known as bad debt and is a normal part of business lending. We believe diversification, where you lend no more than 1% of your total to each business, is the best way to reduce the impact this has on your return. Our automatic lending tool will help you diversify by splitting your investment across lots of businesses. We suggest lending £2,000 or more, so you can lend to at least 100 businesses, with no more than 1% going to each one.  

Each week, we publish a list of the loans being defaulted on the Customer support section of our website under ‘Announcements.’ To see a breakdown of the loans defaulted last week simply click on loans defaulted 4th January 2018  For further information on why Funding Circle defaults loans you can read our FAQ here.

Collections

HowItWorks

You can also read more about how our collections and recoveries process works (part one and part two) on our blog.

Up next in January we’ll be looking at the impact your lending is having on the UK economy and bringing to life some of the businesses you’ve helped access finance.

As always, if you have any questions or comments our dedicated team are here to help. And if you have any further suggestions we’d love to hear them.

Enjoy lending, the Funding Circle team

*Data from CEBR report

This blog is a general summary, and should not replace financial advice tailored to your specific circumstances. Funding Circle is not authorised to, and does not, provide investment, tax, legal or regulatory advice. If you have any questions, please speak to your professional advisor or seek independent specialist advice.