Britain’s fintech industry is flourishing. September industry news

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£1.5 billion lent to British businesses

Five years, four months and ten days after Funding Circle launched, we celebrated investors lending £1 billion. Just nine months later you’ve lent a further £500 million to bring the grand total to £1.5 billion! You and other investors have helped more than 16,000 businesses across the country, including Daren’s bakery in Kent and Candy’s doggy day care in Suffolk. Your continued support has helped these amazing companies acquire the finance they need to grow and prosper. Read more on our blog.

Peer-to-peer: how can I get 8pc for the least risk?

Following the Bank of England’s decision to lower the base rate, the Telegraph discusses the benefits of online lending as another form of investment, including the potential returns and risks involved. With direct lending, the key to managing risk is having a diversified portfolio, which you can achieve by spreading your money across hundreds of loans. Learn why we believe diversification is so important in this video on our blog and on our statistics page. Remember, when you lend, your capital is at risk.

Fintech start-ups put banks under pressure

Technology is increasingly allowing customers to manage their finances on the go. Fintech companies are providing services to suit our fast-paced lives, such as international payments from a mobile phone or lending to small businesses directly through platforms like Funding Circle. Startups have the advantage of being free of legacy technology systems and high overhead costs. Increasingly we’re seeing banks and fintech companies collaborate to provide an even better service to customers.

How to work out the best way to raise money for your business idea

Not only is fintech shaking up the way people invest their money, it’s also opening up new channels of finance for businesses looking to expand and grow. There are many options to consider when looking for funding, and it may be overwhelming if you’re not sure what route to take. This is Money looks at when the right time is to explore external financing, the different choices available and how to decide which one is best suited for your company’s needs.

Britain’s Tech Giants Can Take On The World

Proof that Britain’s technology industry is flourishing is seen in the rising number of incredible tech businesses across the country. Investment into the sector and the funding options now available to these companies helps them to unleash their true potential. For an example of a technology business that has grown and benefitted thanks to you and other investors, check out this case study video on our blog of Danny Long, founder of Pure Technology.

Ex-Lloyds CEO Joins Board of Funding Circle

And finally, we were pleased to announce the appointment of Eric Daniels to the Funding Circle board as a Non-Executive Director. Former Chief Executive of Lloyds TSB, Daniels has over 40 years experience in the financial and banking sector, and will help us to achieve our aim of revolutionising small business finance across the world. Read more in the Telegraph.

Back to school: 5 ideas to kickoff the new academic year

No dreary back to school feelings here. As the summer months come to a close, get ready for the brand-new school year with our back to school list. From new stationery, to books and a cookery school, your lending has helped these creative UK businesses grow and prosper.

papermash

1. Stationery

Head back to school or the office in style with unique notebooks, pens and planners from Papermash. Choose from an array of beautiful prints, such as the bright and whimsical designs of US designer, Anna Bond. To increase their stock and add brand-new items to their popular online shop, Papermash borrowed £5,000 back in 2014.

2. Books

Stock up on a selection of new books to help kick-start your September at Browsers Bookshop. The bookshop, based in Suffolk, carries a wide range of history, biography and business-insight books – whatever you may need to help you flourish in your studies. Browsers Bookshop were able to fit out a new space in their shop to expand their collection of books after borrowing £12,500 from 248 investors.

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3. Children’s books

Are your little ones starting school this year? Get them excited to start learning with Kids IQ Books’ excellent selection of educational books, including sciences, mathematics and foreign languages. In order to add new stock to their shop, Kids IQ Books borrowed £52,000 through Funding Circle. With all those new books you’ll have, Tidy Books make the perfect book boxes to keep them neat and organised. To help with international expansion and growth, the company borrowed £64,000 across 2 loans.

4. Bags

If you’re child is joining sports teams this year, make sure to grab them a trendy new rucksack from Sporty Kids Wear, who launched their website after borrowing £10,000 in 2014. Or you could look at fashionable book bags from The Stripes Company – their Pointe Tote Bag is not only the perfect size for all day-to-day school supplies, it looks great too! The Stripes Company were able to expand their product range using their Funding Circle loan.

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5. Cookery school

And finally, September doesn’t always have to be all about the kids, it could also be the perfect time to join that cooking class you’ve had your eye on. With over 40 cookery courses to choose from to suit beginners as well as experienced cooks, Ashburton Cookery School will help you take your skills to the next level. To expand their facilities in order keep up with the growing popularity of their courses, Ashburton Cookery School borrowed £175,000 across 2 Funding Circle loans.

Are you interested in lending to businesses like these?

Lend alongside 50,000 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.

Enjoy lending. The Funding Circle team

 

Funding Circle announces new Non-Executive Board Member

Today we’re very pleased to announce the appointment of Eric Daniels to the Funding Circle Global Board as a Non-Executive Director.

Daniels has over 40 years’ experience in global banking and financial services. He began his career with Citibank where he spent 25 years and held a number of key managerial positions across a range of businesses and countries. In 2001, he joined Lloyds and was appointed to the Board as Group Executive Director with responsibility for the retail banking division. He became Chief Executive of Lloyds TSB in 2003 before retiring in 2011.

Commenting on today’s news, Samir Desai, CEO and founder of Funding Circle said: “When we first launched Funding Circle our vision was to create the infrastructure – similar to a stock exchange or bond market – where individuals, financial institutions and governments could all lend to creditworthy small businesses. Eric’s deep experience and knowledge of global financial services will be integral to us as we continue to work towards fulfilling this vision”.

Speaking about his appointment, Eric Daniels said: “I’ve been hugely impressed by what the team at Funding Circle has achieved over the last six years. Their commitment to helping small businesses across the world to access the finance they need to grow is bold and exciting. I’m looking forward to working with the team as we continue the next stage of our growth”.

Alongside his role at Funding Circle, Daniels also holds a number of other senior advisory positions. He is Principal and Senior Adviser at Stormharbour, Senior Adviser to CVC Capital Partners, Non-Executive Director at Russell Reynolds Associates, Board Member of the Smithsonian Tropical Research Institute and a Trustee of the Smithsonian UK Charitable Trust.

The announcement marks another important step for Funding Circle, and you can read the full press release here.

The Funding Circle team

Small business, Big impact: an infographic

Independent research published today by the Centre for Economics and Business Research (CEBR) revealed that since Funding Circle launched six years ago, investors including individuals, the government-backed British Business Bank, and a range of financial institutions have helped to create jobs, build homes and support regions that have faced economic hardship in the wake of the last financial crisis.

You can download the full report here and read more about the key findings below.

small_business__big_impact_infographic

Do you want to grow your business? More than 15,000 businesses in the UK have accessed finance through Funding Circle for a range of requirements. You can apply online in less than 10 minutes and check your eligibility in just 30 seconds.

Are you interested in lending to businesses through Funding Circle? Create an account online and start lending the same day. Remember, by lending to businesses your capital is at risk.

The Funding Circle team

FCA launches post-implementation review of peer-to-peer lending

Recently, the Financial Conduct Authority (FCA) launched their post-implementation review of the crowdfunding industry, which is how lending platforms like Funding Circle are regulated. When regulation was first introduced in 2014, the FCA confirmed plans for a post-implementation review in 2016 to ensure regulation for the industry remains relevant, and we’re pleased the review has now been launched. At Funding Circle we have always supported regulation and we’re looking forward to responding over the next few months.

This review will not affect the ongoing process for full authorisation with the FCA. We continue to work closely with them and will confirm to investors as soon as we have received our full authorisation, which will enable us to launch the Funding Circle ISA.

You can find out more information by reading a statement from the FCA. If you have any questions you can also join the conversation over on our forum.

Enjoy lending,

The Funding Circle Team.

Take 10: How to turn your business social

Quick and simple ways to boost your business in just 10 minutes

For the third in our Take 10 series, we’re looking at how you can win business using social media.

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What do we mean by social media?

Websites where users create and share content or participate in social networking, for example Facebook, Twitter, LinkedIn, Instagram and Google+.

Social media can help you acquire new customers

Social media websites, like Facebook and Twitter, have been around for over a decade and have become a key way for many businesses to promote their products and acquire new customers.

Facebook, for example, adds 500,000 new users every day so you can be fairly confident that a proportion of your target audience will have an account and will be logging on for business or pleasure.

Where are your customers

Before getting started, ask yourself which website your target audience is likely to use. We’d suggest you start small, trying out which social media platform works best for your product and then as you gain confidence (and content!) focus your efforts on one or two. You’ll quickly find yourself in a free soapbox from which to promote your business and it’ll become part of your marketing strategy.

Top tip: Facebook have created a handy short video showing you how to setup a business page in a matter of minutes. You can also find out how to sign up to Twitter here.

What is right for your business

It is also important to consider what is right for your business. Pinterest, for example, might be great for a business with attractive products, like a clothing retailer, but is unlikely to be relevant for an accountancy firm. Don’t forget, however, that the most important part is being where your customers are, so even if a platform works really well for your business, but not your customers then it’s unlikely to be right.

Best practice

To promote the best experience for users on social media, many platforms have rules that customise a ‘News Feed’ based on the likelihood that the user will engage with a post.

This means to guarantee your posts are seen by your target audience you need to make them engaging. To give your post the best chance, we’ve put together a couple of quick tips:

  • Keep your message concise: you only have a moment to catch people’s attention!
  • Attach an image: to ensure your post takes up more area on page (real estate) and is eye-catching
  • Calendar hooks: tie your post into a key date or relevant event that your audience may find interesting
  • Tag others: link to other businesses in your post, if applicable, to increase your exposure

How many times a week should I post to guarantee success?

There isn’t a magic number of times that you should be posting, it’s more important to make sure your posts are engaging for your audience. You want to post enough so your customers don’t forget about you, whilst not posting too much to appear ‘spammy’.

The frequency and type of posts can depend on the website you’re using. In our experience:

  • Facebook is best for posting blogs, running competitions or promoting business and industry news
  • Twitter is great for interacting with your customers in real time by joining relevant conversations and finding trending topics. It can also be a good place to post blog content
  • We’d suggest trying something different on Instagram, for example giving your customers an insight into the company through ‘behind-the-scenes’ photos. Instagram users are often less interested in reading longer blogs and press releases

Top tip: for best results, customise your posts and approach depending on the social media website you’re using.

Social media data can help you understand and target potential customers

One of the biggest benefits for your business is the data social media captures about your customers. Facebook, for example, will allow you to target specific groups of ‘prospective’ users through their audience targeting features. You do have to pay for this service, but even with small budgets this can be hugely valuable. We’ll be talking more about this in more detail in our next Take 10 instalment!

Keep track of your activity in one place

As your social media presence increases, and you find yourself posting across a number of social media websites, you may need some help in managing this. Here’s a couple of tracking websites we think do this best:

  • Hootsuite: schedule and report across three social media websites for free
  • SproutSocial: manage, schedule, report and optimise across a number of social media websites. Prices start at about £44 per month

We hope you’ve found this post useful. Come back for the next instalment of Take 10, where we look at the benefits of paying for adverts on social media.

The Funding Circle team

Digging into the Data: The evolution of the assessment process

With the United Kingdom voting to leave the European Union, we wanted to assure you that despite the current political and economic uncertainty, Funding Circle has a robust credit assessment process to seek to ensure the businesses you lend to are resilient.

In this edition of Digging into the Data we will be looking at how our credit assessment process works in more detail, its development and improvement over time, and announcing the latest changes we are making. We will also discuss how we have stress tested our loanbook to seek to ensure Funding Circle portfolios are able to weather periods of volatility.

How does our assessment process work?

When assessing a business, we use a balanced mix of risk tools to ensure we create a full picture of the borrower’s financial health. These are centred around three key pillars; statistical credit models, expert judgment and policy criteria.

Statistical credit models

We have developed proprietary statistical credit models that rank potential borrowers by order of risk, taking into account thousands of individual criteria both from publicly available data sources (like credit reference agencies) and our own database of historical data (including more than five years of information on UK companies). These statistical credit models are used to assign a risk band to the loan, from A+ to E, and identify businesses we are unable to help.

As Funding Circle has grown over the last five years and more loans have matured, this has provided us with more credit performance data, allowing us to make even more accurate statistical credit models. Since we launched in 2010, more than 14,000 businesses have been funded on the platform. We regularly update our statistical credit models to ensure we leverage this valuable experience. As you can see from the below graph*, our 2016 models benefit from being built on a population size significantly larger than what was previously available to us:

1st graph

More data allows us to determine with more precision which factors influence whether a business is more or less likely to default on a loan. This means we get better at ensuring the right businesses are approved, creating more lending opportunities for investors while increasing confidence in the predicted loan performance. This accumulation of experience over time creates a virtuous circle:

2nd graph

Expert judgement

Alongside our statistical credit models, each business is manually assessed by a member of our credit assessment team.

Our team is made up of specialist small business credit assessors, with extensive experience working at some of the UK’s most well known banks. The team reference multiple sources of data; including financials provided by the borrower and leading credit reference agencies, plus the company directors’ own personal finances.

This creates a comprehensive picture of the business’ financial position – allowing the in-house credit assessment team to raise and clarify any potential questions with the borrower before making any lending decision. If the risk of default is deemed higher than our risk bands allow for, the business will be rejected.

By combining expert judgment with statistical credit models, we can make balanced credit decisions resulting in robust credit performance. More information on the expected and actual default rates for our risk bands can be seen on the statistics page.

Policy criteria

Funding Circle receives thousands of applications from small businesses, and having a simple set of policy criteria has enabled us to filter out businesses that have a low likelihood of being approved.

Policy criteria are designed to give direction to business owners so they know whether they may be eligible for finance. This means our credit assessment team only spend time on the right type of applications. As we have accumulated more data on UK businesses over the past five years, we have found that a certain number of creditworthy businesses might have been overlooked, despite being successful and healthy businesses.

To ensure we can help more creditworthy businesses, we regularly review these policy criteria and make any necessary adjustments, retaining the criteria that have proven to identify borrowers outside of our risk appetite. Our latest set of policy criteria are:

  • A minimum of two years trading history
  • At least 1 year of filed or formally prepared accounts
  • No outstanding County Court Judgments larger than £250

With the 2016 generation of statistical credit models and the latest version of policy criteria, we expect estimated average returns to remain consistent: for loans that were originated in 2016 the estimated average return is 7.2%**, with an expected annualised loss rate of c.2%. We also expect performance by risk band to remain the same, although as always, it is important to highlight that your capital is at risk when lending to small and medium businesses.

Consistent results over time

As a result of our improving statistical credit models, our ability to determine which loans are more likely to default has increased. When Funding Circle started, loans accepted on the platform had a similar default rate to those rejected at the final stage of the assessment process. As we have incorporated a wider variety of tools and data sources this ratio has improved, so that by 2015 loans rejected at the final assessment stage were five times as likely to default as those accepted on to the platform.

The below graph shows our bad debt performance against expectations for loans originated each year since Funding Circle started. The data shows the loss rate for loans after 12 months, net of total recoveries received for those loans, for each cohort as a percentage of our expected loss rate. Please note our 2015 cohort is not included as it has not yet seen a full 12 months of performance:

3rd graph

As losses are shown net of total recoveries, previous cohorts have received an additional 12 months of recoveries than subsequent cohorts. Over the last four years, loss rates on the platform have been consistently within or below expectations, despite making changes to our assessment process and introducing higher risk bands.

For up to date information on marketplace performance, including bad debt performance over time by year of origination, please visit our statistics page.

Are we prepared for a downturn?

Following the referendum result for the United Kingdom to leave the European Union, you may have questions about the potential impact an economic downturn may have on your portfolio. Although we are unable to predict exactly what will happen in the future, we have always made preparations to ensure that we are well equipped to weather periods of economic uncertainty.

In 2014 we invited an industry leading external consultancy, Hymans Robertson, to undertake a full assessment of our loanbook. Simulating economic conditions experienced in both the 1992 and 2008 recessions, we were able to see how returns could vary if we saw another downturn in the economy. The full results can be seen on our blog, and we are currently undergoing a new stress test with the results to be published in due course.

At this stage, we don’t expect any potential fallout from the referendum result to create a credit situation worse than previous recessions, and since the performance of our loanbook has remained stable over the past two years, we think that the 2014 stress test exercise still provides a relevant view of what an economic downturn could mean for returns.

In parallel, we have also deployed contingency plans regarding our portfolio tracking and collections activities, scrutinising any sign of stress and ensuring we are ready to take action quickly if credit performance showed any sign of deterioration.

Conclusion

We are committed to enabling investors to earn consistent attractive returns, by lending directly to British businesses and helping to support economic growth. We will continue to make improvements and adjustments to our assessment process, including in response to changing conditions in the wider economy, so you can have confidence lending to businesses through Funding Circle.

We hope you found this piece useful, and if you have any questions please join the conversation over on our forum, or if you have further questions about how our credit assessment policies work, you can watch a recent interview with our Chief Risk Officer, Jerome Le Luel, here.

Enjoy lending,

The Funding Circle team

* The graph shows the number of loans originated on the platform that were at least 12 months old, as of July for each year.

** You can see how our estimated returns are calculated here.

Update on the Funding Circle ISA

Following our last update in April, we wanted to keep you up to date on our progress towards launching the Funding Circle ISA.

As you may know, in order to launch an Innovative Finance ISA, all peer-to-peer lending platforms are required to be fully authorised by the Financial Conduct Authority (FCA). We have been operating under interim permission since April 2014, and we continue to work closely with the FCA. Although significant progress has been made, it is important that the FCA completes this process in a thorough manner.

Therefore, we do not yet have a date for when the Funding Circle ISA will be available, however as soon as we do, we will let you all know.

Other ways to earn tax-efficient returns

In the meantime, if you are looking for tax-efficient returns you could consider the following:

  • The current tax year ends on 5 April 2017, so there is still plenty of time to take advantage before the subscription deadline. You can also open a Cash or Stocks & Shares ISA elsewhere and transfer it over to the Funding Circle ISA when it becomes available.
  • If you are based in the UK, you can earn tax-free returns by holding shares in the Funding Circle SME Income Fund through either a Stocks & Shares ISA or Self-Invested Personal Pension. Speak to your financial adviser for more information.
  • Thanks to the new Personal Savings Allowance introduced by the Chancellor last year, the first £1,000 of interest earned for basic rate taxpayers and the first £500 of interest for higher rate taxpayers is now free of income tax. The Personal Savings Allowance is not available for additional rate taxpayers. This applies to interest earned through Funding Circle as well as through other traditional savings accounts. More information, including a link to the full guidance from HMRC, can be found in our F.A.Q
  • If you are lending as an individual, a new bad debt relief is also available through peer-to-peer lending platforms for loans that have become irrecoverable. The tax statement available to you has been updated to reflect these changes, and more information can be found in our F.A.Q.

Remember, by lending through Funding Circle or investing in the Funding Circle SME Income Fund your capital is at risk.

We hope this update has been useful, however if you have any further questions please feel free to contact us and we’ll be happy to help

Enjoy lending,

The Funding Circle team

 

*This blog post is provided for information purposes only and is not intended to be construed as an offer, invitation or inducement to engage in investment activity in relation to – or a financial promotion of – Funding Circle SME Income Fund. Funding Circle does not give investment advice or recommendations and this blog post should not be relied upon as such*

Stay with a Funding Circle borrower this bank holiday weekend

Summer is fast approaching and with a bank holiday coming up, it’s a perfect opportunity to take a well deserved long weekend away with friends and family.

We have five fantastic Funding Circle borrowers located across some of the most beautiful locations in the UK, so what better time to support small businesses while having a great weekend away!

1. The Crown at Wells

A stone’s throw from Wells Cathedral, this 15th Century coaching inn is based in the heart of the historic city, and was even featured as part of the smash hit comedy Hot Fcrown-at-wellsuzz.

The rustic bistro and bar is named after Quaker William Penn (who gave his name to Pennsylvania USA), as he famously preached to a crowd from an upper window of the inn in 1685. If you are looking for some heritage and history this bank holiday weekend, you will not be disappointed with The Crown at Wells.

To help refurbish the bar, the business borrowed £50,000 from 674 investors.

2. St. Kilda Hotel

With great views of the Irish Sea, St. Kilda Hotel is nestled in the middle of Llandudno’s beautiful promenade, with easy access to all the town has to offer. This family-run business is sure to give you a warm and friendly welcome.

St. Kilda Hotel used their Funding Circle loan to cover maintenance and refurbishment costs, borrowing £30,620 from 322 investors in December 2015.

3. The Oaklands HotelOak-Bar-1

Located just five minutes from Norwich city centre, The Oaklands Hotel is conveniently situated for anyone wishing to explore this charming city. With a bar and terrace, in addition to great local knowledge on offer, you won’t be without things to do!

To complete the refurbishment of the hotel, The Oaklands Hotel borrowed £462,980 over two loans, from 4,683 investors between 2014 and 2016.

4. The White Hart

If you are looking for a more active weekend away, The White Hart offers an ideal place to rest after a day exploring the stunning Lake District. This historic and authentic bed and breakfast is sure to please real ale aficionados, with a well-stocked bar that has featured in CAMRA’s Good Beer Guide.

The White Hart Inn borrowed £30,000 in February 2016 to help provide cash flow.

5. Nethway Hotel030

Set in the beautiful English Riviera, Nethway Hotel is a short walk from both the beach and Torquay town centre. With plenty to do and a picturesque coastline to explore, a weekend away here could be one of your best chances of sunshine this bank holiday weekend.

In order to fully launch a new product onto the market, The Nethway Hotel borrowed £63,160 from Funding Circle in November 2015.

 

Do you want to grow your business? More than 14,000 businesses in the UK have accessed finance through Funding Circle for a range of requirements. You can apply online in less than 10 minutes and check your eligibility in just 30 seconds.

Are you interested in lending to businesses through Funding Circle? Create an account online and start lending the same day. Remember, by lending to businesses your capital is at risk.

Enjoy lending,

The Funding Circle team

Business inspiration from Leicester City

You would have been hard pressed not to have heard about Leicester City’s extraordinary Premier League title win earlier this week, an achievement scarcely believable considering the odds stacked against them. Some bookmakers quoted 5,000-1 for Leicester to win the league at the start of the season.

As a small business owner, it can sometimes feel like you are in your own David and Goliath story, but there are learnings we can apply from this ultimate sporting underdog tale to the small business world.

1. Spend wisely.

It would be inaccurate to portray Leicester City as paupers, the Deloitte Money League ranked them in the top 30 highest earning football clubs in the world for 2016. However the financial gulf between Leicester City and some of their rivals for the title was enormous, with Leicester’s wage bill around a quarter of Manchester United’s two seasons ago. For small businesses access to finance is integral for growth, but investing money in the right way is crucial to keeping ahead of the competition. Like Leicester, recruiting the right staff, with the right mentality, is crucial for success.

2. Teamwork makes the dreamwork.

Although they have some of the league’s outstanding players, a large part of Leicester’s success was driven by their ability to operate as a well drilled unit. Pundits and rival players have commented on how “The whole team all know their jobs, from front to back”, and Leicester’s tactics played to the strengths of the team. Your business may only have a small workforce compared to some of your competitors, but this provides an opportunity to really maximise the human capital available to you. Ensuring each member of staff knows their own role, and also their colleagues’, helps your business operate as a cohesive unit. In addition, setting collective goals for everyone to work towards as well as recognising that each employee will have their own individual ambitions, results in everyone pulling in the same direction.

3. Support from the top to the bottom.

From the boardroom to the changing room, each level of management within the Club looked to provide as much support as possible. For example, Leicester’s Thai owners flew a group of buddhist monks to the UK for most home games to bless the players before kick off, while the manager took the whole team out for pizza every time they achieved a clean sheet. Recognising even the smallest victory, by any employee at any level, helps build a culture that rewards and motivates your team to success.

4. Responding to setbacks.

One thing that surprised so many about Leicester’s season was just how consistent they were, responding to the inevitable bad results that occur over the course of the season instantly and decisively. Over the entire season, the longest Leicester went without a win is three games, and followed their last defeat with a ten game unbeaten streak. Likewise, when running any business setbacks are inevitable. What matters is how prepared your business is for when they occur, and most importantly, how you can apply the learnings that you and your team take from them.

We hope you have found this useful, and to find out if a business loan from Funding Circle is suitable for you, check your eligibility online in just 30 seconds.

The Funding Circle Team

Five tips to protect yourself online

The internet has revolutionised everyday activities such as shopping, communications, and the way we control our finances; however, despite the many benefits the internet brings there are risks involved too – particularly around online security.

Here at Funding Circle we care about investors and borrowers staying safe online and wanted to provide a few pointers to help you better protect your identity online and stay safe.

1. Keep your password secure.

  • It’s important not to use the same password on multiple websites, especially those used for personal finance, such as Funding Circle. For example, if you used the same password for your email and Funding Circle accounts and your email account were to be compromised, an attacker may also be able to access your Funding Circle account (especially if they know the answers to your security questions).
  • Try to use at least 8 characters, including a minimum of one capital letter and symbol. The more complex the better, a random string of characters will be much harder for a potential attacker to crack.
  • Change your passwords regularly, at least every six months. If you think your password may have been compromised, contact us right away.

2. Keep your security protection up to date.

  • Ensure you have installed the latest security updates for your computer, that you have reputable anti-virus software installed and running, and that your firewall is enabled on your devices.

3. Be careful with your personal information.

  • Be wary when using social networks – they are fantastic tools to communicate with friends and family, but over sharing can provide easy access to your personal information.
  • Do not write down your username or password on a piece of paper, if you need help remembering your complex passwords, there are many reputable password manager tools available.

4. Beware of social engineering.

  • Even with up to date anti-virus software, potential attackers could gain access to your data by influencing you to willingly hand over personal information. You should never give your password or sensitive information to anyone over the phone, even if they claim to be from a trusted source.
  • Phishing – or the art of obtaining information using fake emails or websites, is common practice. If something sounds too good to be true, it usually is. You can test your skill at spotting a potential scam with this online test.

5. Protect your Wi-Fi network.

  • When out and about, be careful of public wi-fi offered on trains, hotels and shopping centres. Never conduct any financial transactions on a network that you do not completely trust.
  • Unprotected wi-fi networks are an easy way to access information stored on your network. Ensuring your home router has a unique, complex password is a must.

We hope this has been helpful, and there is plenty of further information available online to help keep you or your business secure. If you have any further queries, please don’t hesitate to get in touch.

Thanks,

The Funding Circle Team

Marketplace lending is about to enter a golden age. March industry news

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Ex-European Central Bank, Germany Official Asmussen Jumps Into Online Lending Boom

This month, we were incredibly pleased to announce the appointment of Jörg Asmussen to the Funding Circle board. Jörg is a German economist and policymaker who has held numerous high-profile positions, including as a finance minister and at the European Central Bank. We are hugely privileged to have him join the team, and his experience and expertise will be very useful as we accelerate our growth across the UK, US and Europe. Further coverage seen in Business Insider.

Should you use your Isa for peer-to-peer lending?

As you may be aware, the government will launch the Innovative Finance ISA this tax year, which will enable you to earn tax-free returns by lending to businesses directly through Funding Circle. In order to launch an Innovative Finance ISA, all peer-to-peer lending platforms are required to be fully authorised by the regulator, the Financial Conduct Authority (FCA). The FCA is close to completing their review process with us and we’re very excited to launch the Funding Circle ISA as soon as we receive full authorisation. For more information, please read our most recent blog post and take a look at our website. You can also read more about Innovative Finance ISAs in City AM and Telegraph.

Funding Circle SME Income Fund buys loans in Continental Europe

In other exciting news, the Funding Circle SME Income Fund is now lending to small businesses through Funding Circle’s marketplaces in Germany, Spain and the Netherlands. The SME Income Fund was listed on the London Stock Exchange towards the end of 2015, and lends exclusively to small businesses through Funding Circle’s marketplaces in the UK, US, and now Europe. Investors in the UK can hold shares in the Funding Circle SME Income Fund through either their existing Stocks & Shares ISA or Self Invested Personal Pension. Please contact your financial adviser with any questions.

Funding Circle’s CEO addressed ‘the most pertinent question anyone can ask about our industry’

Our CEO, Samir, gave the keynote speech at AltFi, a leading industry conference, where he addressed the challenges and opportunities for marketplace lending. Welcoming recent scrutiny on the sector, Samir believes the reasons for founding Funding Circle remain the same and that contrary to recent criticism, marketplace lending is about to enter a golden age. You can watch his full speech here and read further coverage in Financial Times.

Funding Circle is dedicating an entire floor in its new office to younger startups

And finally, do you know of any start-up or small companies looking for a new workspace to call home? At our London headquarters, we’ve dedicated an entire floor to younger and smaller businesses who are in need of desks in the heart of the city at a reduced market rate. Our Chief Operations Officer, Pam Burton, commented: “We know what it’s like to be small and entrepreneurial, and we hope that access to central London and the city will mean other firms have the opportunity to flourish.” Spark any interest? Please see here for more information and get in touch!

Helping businesses finance more of their requirements

Over the course of the past 5 years, we have extended the types of loans we offer to help more small businesses access finance. As businesses increasingly look to Funding Circle first, we want to help them finance more of their requirements through the marketplace.

This week we are updating clause 10 of our Investor Ts&Cs (and the relevant loan conditions stated at the end of this blog) to enable us to facilitate loans at different risk bands to the same borrower, to reflect the risk of each individual loan.

This means that in the event of a default, recoveries will be distributed according to the type of security a loan has. This will apply for new loans taken out after the Ts&Cs have been updated on 23 March 2016. Tomorrow, you will be required to re-accept the loan conditions before placing a bid, to ensure you are aware of what these updates mean going forward.

What’s changing?

Borrowers at Funding Circle can already have multiple loans, and from tomorrow, these loans can be in different risk bands if there is different security. For example, a business may need two loans; one for working capital with a director’s guarantee, and one for a commercial mortgage, secured over a property.

Security

Security may relate to one loan, or be “all monies” which means that subsequent loans have the benefit of the same security. Security may also relate to a specific fixed asset, such as a property, or be floating over all of the assets of the business.

Updates to clause 10

The updates to clause 10 will clarify how we will act in respect of 1) recovery strategy and 2) the priority of recovery distributions for multiple loans.  

What does this mean if a loan defaults?

1)When a loan is defaulted, different strategies may be taken to recover money, depending on the security type.

For example, investors who have loan parts with a fixed charge on a property, may want that property sold as quickly as possible by a receiver; whereas investors who have a floating charge may wish to hold out for a buyer of the whole business because this may provide some equity to the property that they can benefit from. In this example, Funding Circle will act in the interests of the investors with the benefit of the fixed charge in priority to the investors who have the benefit of the floating charge.

2)The updates to clause 10, effective from 23 March 2016, will determine the priority of recovery distributions and these will be:

  • first, fixed charge security on specific loans will rank ahead of all monies security;
  • second, property loans will state how the security will be applied if there is more than one loan to the borrower; and
  • third, where there is more than one loan benefiting from all asset security then the distributions of the loans will be equal.

This is a natural next step of the marketplace and will allow us to help more businesses with different finance needs whilst also being fair to investors.

Loan conditions

Along with the investor and borrower T&Cs, the loan conditions (in relation to new loans only) will be updated to reflect these changes:

  • clause 2.4: changes to clarify that it applies to loans in arrears;
  • clause 3.2: changes to provide that interest at the contractual rate calculated on a daily basis continues to apply to any outstanding sums after the contractual term has ended;
  • clause 4.2(o): this clause has been added to enable the loan to be terminated in the event of a material adverse change in the financial condition of the borrower or any guarantor;
  • clause 7.2: changes to enable Funding Circle or its agent to inspect a borrower’s property or security; and
  • clause 10.3: changes to ensure consistency with borrower Ts&Cs and guarantee.

Changes to Privacy Policy

We have also taken this opportunity to make some small updates to our privacy policy.  The changes will be to:

  • clarify how and when we process your personal data by giving additional examples;
  • better signpost certain rights afforded to you;
  • better explain how we run our business;
  • confirm our expectations as to the maintenance of the security of your login and account details.

If you have any questions about these changes please contact us, and we will be happy to help.

The Funding Circle team

If you could reinvent a bank today, would you? February industry news.

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The never-ending story: Europe’s banks face a frightening future

As bank profits continue to fall and layoffs continue to increase, this Bloomberg piece looks at how the banking world has changed since the financial crisis, not to mention the challenges still faced. With the proliferation of technology start-ups that are able to cut out the traditional middle man by linking supply directly with demand, our CEO Samir Desai asks: “if you could reinvent a bank today, would you?”

P2P sheds ‘alternative’ label and moves into mainstream

Thousands of businesses have benefitted from marketplace lending across the country, such as Funding Circle borrower, James Chocolates. This chocolate extraordinaire explains how they went through all of the same processes as a bank in order to borrow from investors like you, however the speed and simplicity of using a platform like Funding Circle was incomparable to the experience they had with high street banks. James Chocolates is backed by over 2,500 individual investors that have helped his business to grow and flourish. Make sure to check out his marvellous shop here ahead of Easter.

Funding Circle’s Sam Hodges: ‘Everyone has a plan, until you get hit in the teeth’

Sam Hodges, Managing Director of Funding Circle US, offers his best advice for first-time entrepreneurs. He discusses his biggest mistakes at the beginning of his career and useful advice that he received. Sam advises: “Don’t rush things. If you’re smart and passionate, success will follow.”

Peer-to-peer lending doubled to £2.2bn in 2015 as industry awaits launch of P2P ISA

As the countdown to the new tax year continues, peer-to-peer lending platforms are getting ready for the introduction of the ‘Innovative Finance ISA’ (IFISA) which is scheduled to launch 6th April. This is a seminal moment for our industry as it will allow you to earn tax free returns on lending up to £15,240 per year. For things to consider ahead of opening an IFISA, check out our latest blog post. You can also read more about ISAs in the Financial Times, Daily Mail and Independent. If you have any questions in the run up to launch, please email our customer relations team at contactus@fundingcircle.com or call us on +44 (0) 207 401 9111.

Peer-to-peer lending: everything you need to know about the leading websites  

For a useful overview of the leading platforms in this space, take a look at this Telegraph piece. Since all platforms are different, it’s essential that you understand how each one works and the potential risks involved before lending your money. Remember, your capital can go down as well as up.

Range of investors behind a quarter of loans on peer-to-peer websites

The latest alternative finance benchmarking report from the University of Cambridge and Nesta shows that a wider range of investors are becoming involved in marketplace lending – from retail investors, to government, to financial institutions such as banks and pension funds. This is welcome news – having a diverse mix of investors at platforms will ensure they are sustainable in the long run, which will help to protect small businesses in a future economic downturn.

City grandee Lord Turner warns on peer-to-peer lending risks

And finally, you may have seen recent articles about the industry that stemmed from Lord Turner’s comments, a former chairman of the Financial Services Authority. As peer-to-peer lending matures, we welcome increased scrutiny of the sector and embrace it as an opportunity to show that Funding Circle’s platform and processes are robust, stable and transparent. Our loanbook has been independently stress tested by the same people who stress test the high street banks. The report found that even in the most extreme economic conditions (which the Prudential Regulation Authority set in 2014 at the time they stress tested the high street banks), average annualised returns for Funding Circle investors would remain above 5.5%. Read more here. As with all stress testing assessment, it is important to note that past performance is not necessarily a guide to future performance. The nature of modeling for future economic events is that it is an estimate.

6 reasons why Funding Circle is the best place for your Innovative Finance ISA

Soon you’ll be able to earn tax-free returns at Funding Circle, thanks to the launch of the new Innovative Finance ISA. Currently you are able to split your annual allowance of £15,240 between a cash ISA and a stocks and shares ISA, and new for the 2016 tax year, you’ll also be able to open an Innovative Finance ISA (IFISA).

We’ll be confirming more details on how you can open your Funding Circle ISA over the coming weeks, but ahead of the launch, we wanted to share 6 key reasons why we believe Funding Circle is the best platform for your new Innovative Finance ISA. For the latest ISA news from Funding Circle, click here.

1. You can earn an estimated annual return of 7.1% lending to British businesses

ISAs enable you to make tax-free returns on your money, but with only one Innovative Finance ISA available to subscribe to every year, it’s important to maximise the tax benefits of any investments you hold.

The current estimated return at Funding Circle is 7.1%* which is the highest estimated return across all of the major platforms, enabling you to maximise your tax-efficiency and save the most tax.  

If a higher rate taxpayer lent £10,000 through Funding Circle with an average return of 7.1% after fees and bad debts, their earnings, after deduction of income tax at 40%, would be approximately £426 after one year. By taking advantage of the new Funding Circle ISA, those earnings would increase to £710.

Since launching in 2010, investors have collectively earned more than £72.5 million in interest, after all fees and bad debts have been deducted. Data correct as of 8 March 2016.  

2. Your lending helps British businesses grow

By lending directly to UK businesses through Funding Circle, you can earn attractive returns whilst also having a real impact on the growth of the UK economy. To date, Funding Circle investors have helped more than 15,000 businesses access finance.

Independent research by think-tank Nesta found that an average business borrowing through Funding Circle employs approximately 10 people, and increases headcount by 30% within 12 months of successfully accessing finance.

3. You can diversify your funds across thousands of borrowers

More than 15,000 businesses have taken out loans over the last 5 years, which means there are more lending opportunities for investors at Funding Circle than any other small business lending marketplace in the UK.

By lending as little as £20 to each business, you can spread your money across thousands of borrowers. Not only does this help more businesses to grow, but your investment will also be diversified, helping you to earn a more stable return by managing risk effectively.

To be diversified, we encourage:

  1. Lending to at least 100 businesses;                                                                                             2. Lending no more than 1% of your total investment to each business.

As of January 1st 2016, every investor who has followed these 2 simple steps has earned a positive return, and approximately 92% have achieved a return of at least 5% after fees and bad debt^. Past returns are not necessarily a guide to future returns as by lending to businesses, your capital is at risk.

4. You have options to access your money early

There may be times when you want to access your money before the end of a loan term, and the marketplace provides a way for you to do this. You can access money early by selling loan parts to other investors for a 0.25% fee. More than £175 million of loan parts have been traded so far.

It’s worth noting that your ability to sell loan parts is not guaranteed, and largely relies on demand from other investors to buy them. You can also withdraw your monthly repayments  whenever you wish.

5. Our robust credit models have been stress-tested by a leading consultancy

Alongside our strong track-record and experienced team of in-house risk experts, we publish all information regarding bad debts on our statistics page so you can see how loans perform against expectations. The current bad debt rate is 1.5%, compared to the annual estimate of 1.7%.

We also commissioned independent stress testing of our loanbook (all Funding Circle loans) to estimate how loans would perform in the case of an extreme economic downturn. A leading consultancy, who stress test banks, built a stress testing model for us and applied their model to our loans. The results were positive, estimating a fall in the overall annualised return investors would earn, after fees and bad debt, to 5.6%.

It is important to note however that past performance is not necessarily a guide to future performance, and the nature of modeling for future economic events is that it is an estimate.

6. A commitment to transparency

We believe transparency is a crucial part of lending so we publish the full historical performance of all loans on our statistics page. This includes details on the total amount lent and repaid, average interest paid across all loans, and details of any bad debts. Additionally, we think it’s important investors can see exactly who they’re lending to. You can see details about every borrower including financial performance and sector, and you have the opportunity to ask businesses questions before lending to them.

Enjoy lending 

We hope you found this post useful. We’ll be publishing more information over the coming weeks about ISAs, including how Funding Circle returns compare with other investments; as well as updating you on when and how you can open your Funding Circle ISA account.

If you have any immediate questions, please feel free to leave comments below or join us on our forum where we’ll be discussing ISAs in more detail.

The Funding Circle team

*The current estimated return is an estimate of the annual return after fees and bad debts that investors could earn from lending money to businesses seeking loans today (8th March 2016). It is calculated by taking the gross interest rate less fees and estimated bad debts that will occur in the future for each of the last 100 loans accepted on the marketplace. The average return is compounded and is updated daily.
^This is based on the 21,086 investors who have been lending for at least 1 year and have been at the stated level of diversification for at least 75% of the days they have been lending (44.3% of all active investors).This data is based off actual returns for people lending for at least 1 year and does not include future expected losses. Remember, past returns are not necessarily a guide to future returns.

Easter treat ideas from local UK businesses

To help make your Easter extra special this year, we’ve put together a list of 5 tasty Easter treats from small UK businesses. These fantastic companies from across the country have grown and flourished, thanks to your support.

5. Planning an Easter egg hunt?

Beech’s Fine Chocolates has you covered with delicious Milk Chocolate Mini Eggs. Or grab the Milk Chocolate Bunny Family so you can enjoy with the entire household. The company, who borrowed £250,000 in January 2016 to keep up with high demand, are expecting a visit from us next week – so keep an eye out for a video on blog soon. They’ve also been included in a BBC programme called ‘Who’s the Boss.’

4. Can’t decide on just one goody?

Pick up an Easter Hamper from D&D for a selection of delicious chocolates. The chocolatiers, who borrowed over £11,000 from 1,256 investors in 2014, also make a wide variety of carob sweets, a healthy chocolate alternative, and used the loan to purchase a larger fridge to cope with the high interest in these scrumptious goods.

Screen Shot 2016-03-04 at 10.55.123. Grab a friendly treat for the little ones.

With a choice of white or milk chocolate, these handmade chocolate Rabbit Lollies from Choc Affair are the perfect treat for kids (or adults). Choc Affair, who came to Funding Circle back in July 2013, also supply a range of unique flavoured chocolate bars such as Lime & Lavender, Raspberry & Rose, Lime & Sea Salt and Orange & Geranium. Divine!

2. Do you love organic and fairtrade sweets?

If you do, Luxury Truffles from Naturally Good Food are a must try for you! The truffles are hand-rolled, dipped and tumbled in milk chocolate flakes and finished with a delectable champagne centre. They also stock an organic and gluten free Cheeky Orange Bar which is suitable for vegans.

1. A unique spin on the classic Easter egg.

And our number 1 Easter goody is the Milk Chocolate Easter Egg from Hamilton’s Chocolates. Handmade with heavenly chocolate, they are guaranteed not to disappoint! In February 2014, Hamilton’s Chocolates used their business loan to purchase additional equipment so they could create different types of tempting goodies.

Looking for more inspiration?

Read through our other gift ideas supporting small businesses.

Do you want to grow your business?

We’ve helped more than 15,000 businesses in the UK, US, and Europe access finance for a whole range of needs. You can apply online in 10 minutes, and you’ll hear back from our team within 2 working days.

Enjoy Lending. The Funding Circle Team

The changing face of finance | Weekly Lending Review

Week 7: 8 – 12 February

Last week, you and other investors lent £14.9 million to 200 businesses across the UK, and the Guardian looks at how buy-to-let landlords are turning to marketplace lending following recent tax changes in our round-up of last month’s industry news.

New loans available to you

There are currently 32 loan requests on the marketplace, and thousands of loan parts available for you to buy.

The total value of new loans listed on the Funding Circle marketplace was £17,442,820 averaging at £74,620 per loan. The largest loan value was £429,360 and the smallest loan value was £5,000.

Business loans available to bid on:

Gross interest rates are before fees and bad debts. Your actual return may be higher or lower as by lending to businesses your capital is at risk.

Weekly marketplace trends

These graphs show the most recent activity on the marketplace. The dates on the graph should be read as ‘week beginning’, for example: 8-Feb represents the week of 8th – 12th February.

The average gross yield graph is reported weekly and shows a rolling two week average of gross yields. This calculation assumes you reinvest your interest each month and therefore includes the compound interest you earn (The calculation is AGY = (1 + (two week rolling weighted average rate/12))^12 – 1). You can view the latest gross interest rates accepted on the marketplace on our statistics page.

Weekly average gross yield (2 weeks rolling)

WLR 7-16 yield

Number of loans, value of loans and amount lent are reported weekly.

Number of listed loans per week

WLR 7-16 loans listed

Listed loan value per week

WLR 7-16 loan value

Total amount lent

WLR 7-16 amount lent

Loan parts available to buy from other investors

WLR 7-16 loan parts

Loans defaulted last week

Car sales business. Loan 3978. Risk band A

This Kent business was established in 2003 and is three months in arrears.

Building consultancy. Loan 14834. Risk band A+

This Cheshire business has been running since 2012 and is being placed in creditors’ voluntary liquidation.

Graphic design agency. Loan 3379. Risk band D

This London business was established in 2000 and was placed in liquidation in February.

Money advice service. Loan 4129. Risk band C

This Nottinghamshire business has been running since 2009 and is being placed in liquidation.

Marketing agency. Loan 2608. Risk band A

This Berkshire business was established in 1999 and the borrower has become unresponsive.

Manufacturer. Loan 891. Risk band B

This West Yorkshire business has been running since 1961 and has been placed into administration.

Graphics producer. Loan 5304. Risk band B

This Nottinghamshire business was established 2003 and has ceased trading.

Website developers. Loan 3451. Risk band A

This Nottinghamshire business has been running since 2011 and is being placed into formal insolvency proceedings.

Electrical contractor. Loan 11066. Risk band C

This Birmingham business was established in 2011 and has ceased trading.

Lending to businesses can deliver attractive returns, while helping businesses access the finance they need to grow. However, from time-to-time some businesses will be unable to repay their loan, which is why lending a small amount to lots of different businesses is so important. As of 1st January 2016, 100% of diversified investors are earning a positive return*. Watch our 90 second diversification video to find out more. Remember, your actual return may be higher or lower as by lending to businesses your capital is at risk.

Our collections and recoveries team are working to recover the outstanding amounts for all of the loans described above and they will provide you with updates in the loan comments section on your summary page. Read how our collections and recoveries process works (part one and part two) on our blog.

Enjoy lending, the Funding Circle team

 

*This is based on all investors who have been lending for at least 1 year to 100 businesses with a maximum exposure of 1%, and have been at this level of diversification for at least 75% of the days they have been lending. It includes all earnings and is calculated after fees and bad debt but before tax and does not include future expected losses.

Take a tour of 2 new family homes | Weekly Lending Review

Week 3: 11 – 15 January

In November 2014, we visited Funding Circle borrower Medina Capital Investments at a demolition site in West London. Just over a year later, we returned to the site to see the final touches being made to two new family homes. There’s a short video on the blog where you can meet business owner Nidal, take a quick tour round the new homes, and hear how, thanks to your lending, he’s been able to expand his business twofold in the past 8 months.

New loans available to you

There are currently 30 loan requests on the marketplace, and thousands of loan parts available for you to buy.

The total value of new loans listed on the Funding Circle marketplace was £15,413,760 averaging at £60,327 per loan. The largest loan value was £500,000 and the smallest loan value was £5,000.

Business loans available to bid on:

Gross interest rates are before fees and bad debts. Your actual return may be higher or lower as your capital is at risk.

Weekly marketplace trends

These graphs show the most recent activity on the marketplace. The dates on the graph should be read as ‘week beginning’, for example: 11-Jan represents the week of 11th – 15th January.

The average gross yield graph is reported weekly and shows a rolling two week average of gross yields. This calculation assumes you reinvest your interest each month and therefore includes the compound interest you earn (The calculation is AGY = (1 + (two week rolling weighted average rate/12))^12 – 1). You can view the latest gross interest rates accepted on the marketplace on our statistics page.

Weekly average gross yield (2 weeks rolling)

WLR 3-16 yield

Number of loans, value of loans and amount lent are reported weekly.

Number of listed loans per week

WLR 3-16 loans listed

Listed loan value per week

WLR 3-16 loan value

Total amount lent

WLR 3-16 amount lent

Loan parts available to buy from other investors

WLR 3-16 loan parts

New forum

To start the new year in style we’ve moved to an easier to use forum. Your existing usernames are still in place and if you’re new, come join the conversation here.

Loans defaulted last week

Kitchen specialist. Loan 2399. Risk band C

This London business was established in 1975 and entered into a Company Voluntary Arrangement in May 2014.

Cookery school. Loan 13233. Risk band D

This Leicestershire business has been running since 2011 and is late in making repayments.

Design agency. Loan 4304. Risk band D

This London business was established in 2000 and has become unresponsive.

Our collections and recoveries team are working to recover the outstanding amounts for all of these loans and they will provide you with updates in the loan comments section on your summary page. Read how our collections and recoveries process works (part one and part two) on our blog.

Enjoy lending, The Funding Circle Team

2015, a revolutionary year for marketplace lending. December industry news.

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Funding Circle passes £1 billion lending milestone 

What an amazing way to end the year! In just over 5 years, your lending has helped over 12,000 small business in the UK access finance through the Funding Circle marketplace. More than £500 million was lent in 2015 alone. Thank you for all your continued support, we couldn’t have reached this major milestone without you! Further coverage can be found in the Financial Times, Business Insider and Altfi. Check out our blog for more information, and you can listen to co-founder Andrew Mullinger discussing the implications of rapid growth in a recent podcast published in the Financial Times.

Lending services revolution piles pressure on banks as fintech sector grows

From banking to investment, financial technology has revolutionised the way investors and businesses can access financial services. Warren Mead, head of alternative finance at KPMG, expects that investment in fintech will grow to more than $30 billion over the coming year, up from $20 billion in 2015. As the disruption of the fintech sector continues, traditional lenders have started to work with these innovative companies, providing more exposure to marketplace lending for investors. Read more on this topic in the Financial Times, CityAM, and watch Sam Hodges, Funding Circle’s US Managing Director, on Bloomberg discussing the future of marketplace lending.

Property tech sector is battling inertia to shake up Britain’s housing industry

The UK property technology sector has seen significant growth over the past 18 months, with marketplace lending platforms playing an important role. The emergence of platforms has enabled access to property loans as an investment class, helping to build thousands of much needed homes across the UK.

How P2P can take the strain of tighter bank capital rules

As the industry continues to grow, different types of investors such as hedge funds, pension funds and the Government are now lending alongside individuals. At Funding Circle, we believe that a diverse range of investors, big and small, will make the marketplace more sustainable in the future. At a recent investor evening, Funding Circle co-founder James Meekings talked about what this means for you. Watch the full video on our blog.

Why 2016 will be the year that peer-to-peer lending finally enters the financial mainstream

By the end of 2015, UK marketplace lending platforms facilitated  around £3 billion of lending, and by the end of this year lending volumes are on target to double. In just 10 years, marketplace lending platforms have developed immensely and form a significant part of the wider financial landscape. With such rapid growth in the sector, fair regulation becomes increasingly important. Britain is currently the only place in the world with a dedicated regulatory regime for the UK marketplace industry, and platforms plan to become fully regulated by the FCA in 2016. Read the CityAm piece here.

New Year honours: six key figures to be recognised

And finally, to wrap up the year, it was a proud moment for Funding Circle as CEO and co-founder Samir Desai was given a CBE  in the New Year’s Honours list for his contribution to the financial services sector. He’s quoted, “This honour is testament to the hard work of the team who have helped originate £1.25 billion of loans from thousands of investors to small businesses in the last five years, creating over 50,000 new jobs globally.”

October round-up of the marketplace

October was a busy month at Funding Circle: we launched across Europe to help more businesses access finance, you helped 616 UK businesses borrow through the marketplace creating an estimated 1,800 jobs*, and it was the first month with fixed interest rates on all new loans.

charlie image

What are fixed rates?

Fixed rates are where Funding Circle sets the interest rate of a loan, based on a number of factors including the risk band and term of the loan. We wanted to improve the overall experience for our community by moving away from the auction model, to ensure that money is used efficiently, businesses have access to fast finance, and interest rates reflect the risk of a loan rather than liquidity. Now we’re one month in we wanted to share some further analysis into how the funding process has evolved from auctions, and provide more information about the marketplace today.

Money is used efficiently

Certainty of cost is important for business owners as it allows them to budget. Since moving to fixed rates, we can now provide an interest rate and repayment amount to a business before the funding process.

When a business applies for a loan and passes our credit assessment process, they can accept their loan as soon as it has fully funded. Before fixed rates were introduced, approximately 65% of borrowers would leave their auction running for the full 7 days to see whether the interest rate would fall. If you placed a bid at the start of an auction, it could take up to 2 weeks for your money to start earning interest. Now, just 20% of loans stay on the marketplace for the full listing period (typically 7 days).

Reducing the uncertainty of cost has resulted in businesses accepting their loans faster than before. By way of a comparison, the median time (from listing) for a loan to be accepted by a business has halved since introducing fixed rates, from approximately 8 days to 4 days currently, as of 5th November 2015. Committed funds are earning interest faster than before, and businesses are accessing finance faster.

Updates to Autobid

At the start of October loan requests funded very quickly and many of you fed back that it was difficult to research businesses before placing a bid. We have since made an update to how Autobid works and will continue to monitor the funding process.

How have fixed rates affected the secondary market?

The secondary market enables you to buy and sell loan parts with other investors, meaning you can build a diversified portfolio quickly.

Over the past month, liquidity on the secondary market has remained stable. The cohort graph below shows the proportion of loan parts sold which were listed for sale. Approximately 90% of loan parts listed with a discount have sold and 80% of those listed at par. Therefore if you’re looking to sell loan parts, those listed at par or a discount are more likely to be sold.

lps sold nov

Of the property loan parts listed for sale, a lower proportion of them have sold in comparison to business loan parts. This difference can be attributed to the cashback promotion we have been running on property loans. Comparing the lines on both graphs, discounted loan parts are selling for both business and property loans at a similar rate of 90%.

property LPs nov

Are you lending to 100+ businesses?

We also published the latest distribution of returns for Funding Circle investors, at different levels of diversification. You can view these on the statistics page. As of October 1st, 100% of investors who have been lending for at least 1 year and to at least 100 businesses, with no more than 1% lent to each one, are currently earning a positive return**. Read more about diversification and it’s benefits and remember, by lending to businesses your capital is at risk.

Conclusion

We hope this has been a useful summary of how the marketplace has developed since introducing fixed rates. We continue to monitor how loans are funding, and may make small updates to the funding process over the coming months so ensure both investors and borrowers have the best experience possible.

We’re over on the forum talking about this, and we’d love for you to join us there.

The Funding Circle Team

 

*Independent research by Nesta, a government think-tank, found that businesses who receive a loan through Funding Circle employ on average 11 people, and see an average increase in employment of 27 per cent after receiving finance.

 

**The returns shown are based on all 33,616 investors who have been lending for at least 1 year (73.2% of all active investors) and have been at the stated level of diversification for at least 75% of the days they have been lending for. It includes all earnings and is calculated after fees and bad debt but before tax. Investment through Funding Circle involves lending to small and medium sized businesses so your investment can go down as well as up. This data is based off actual returns for people lending for at least 1 year and does not include future expected losses. Remember, past returns are not necessarily a guide to future returns.