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.

 

Fixed interest rate roundup and an interview with a borrower in The Times | Weekly Lending Review

Week 41: 5 – 9 October 2015

Fixed interest rates have been on the marketplace for just over two weeks since launching on Monday 28th September, so we wanted to share some initial insights into the trends we’re seeing on the marketplace which you can read about on the blog.

Thank you to everyone who has provided feedback. If you have any additional questions you can join us on the forum or send us an email: contactus@fundingcircle.com

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 £12,277,540 averaging at £75,704 per loan. The largest loan value was £415,000 and the smallest loan value was £5,160.

Business loans available to bid on:

Loan parts available for you to buy:

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: 5-Oct represents the week of 5th – 9th October 2015.

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)

yield WLR 41

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

Number of listed loans per week

loans listed WLR 41

Listed loan value per week

loan value WLR 41

Total amount lent

Amount lent WLR 41

Loan parts available to buy from other investors

loan parts WLR 41

News you should know

September industry news

The Times interviewed borrower Verto Homes, who are building 21 environmentally friendly family homes in Cornwall, and Funding Circle was ranked No. 1 in Business Insider’s 17 hottest fintech companies in Britain. Read our roundup of last month’s industry news on the blog.

Things we’re talking about

Trick or Treat?

Halloween’s approaching, but don’t be afraid. We’ve put together a list of ideas to make sure your friends and family have a frighteningly good time. Pick your poison on the blog.

Loans defaulted last week

Home insulation specialists. Loan 10851. Risk band A+

This Manchester business has been running since 2003 and is looking to be placed into creditors voluntary liquidation.

Food wholesaler. Loan 1368. Risk band A

This London business was established in 2006 and the borrower has become unresponsive.

Bus service operator. Loan 11003. Risk band D

This Glasgow business has been running since 2010 and ceased trading on 26 July 2015.

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 more about how our collections and recoveries process works on our blog.
Enjoy lending, The Funding Circle Team

We’re introducing fixed interest rate loans today

At the start of September we announced plans to introduce fixed interest rates for all new loans, similar to how property loans have operated on the marketplace for 18 months. This is where Funding Circle sets the interest rate of the loan before it is listed on the marketplace. Rates are based on a number of factors including the risk band and term of the loan. 

We’re pleased to announce that the first fixed interest rate loans (other than property) will be listed on the marketplace today.

The new gross interest rates are listed below, before fees and estimated bad debts. These rates do not affect any of the loan parts you currently hold, they only apply to loan requests listed from 28th September 2015.

Please note these rates do not include property loans which will be set on a case by case basis. We’ll review these rates on a regular basis and notify you if they change.

Fixed rate card

Going forward you will see the interest rate available for each new loan request on the marketplace. Loans will continue to be listed for 7 or 14 days and during this time, you can choose whether to place a bid knowing your bid cannot be knocked out by other investors. 

If you use Autobid you will have received emails over the last 4 weeks regarding this update and your current settings. You can read more about updating your settings in our Autobid blog post here. If you’re unsure about what this means for you, please contact us and we’ll be happy to help. You can call us on 0800 840 4075, or send us an email.

 

 

Updates to our T&Cs and Privacy Policy

Following our announcement of moving to fixed interest rates for all new loans, on Monday, 28th September we will be updating the terms & conditions for both investors and borrowers. We’re also taking this opportunity to update and simplify other clauses, set out below.

What you need to do

From next week, if you’re an investor you’ll be required to re-accept the loan conditions next time you place a bid or buy a loan part, as the updates below are included in the loan conditions.

If you’re a borrower, there’s nothing you need to do other than read the new conditions.

Investor T&Cs:

  • We’re changing the term ‘lender’ to ‘investor’ so the T&Cs are consistent with the website.
  • Clause 4 – we’re removing references to auctions and adding that all new loans will be listed at fixed interest rates.
  • Introduction paragraph 5 – we’re clarifying there is one borrower contract and how it works.
  • Clause 12.4 – the term novation is changing to assignment as it better describes the way in which the transfer works, on default of a loan or sale of loan part on the secondary market.  Investors will now assign their rights to another investor or to a Funding Circle company on default of a loan, and the loan conditions provide that the new investor becomes party to the loan and takes on any obligations of the transferring investor. This has no impact on you but helps with certain regulatory analyses.
  • Clause 12.4 – we are removing the option to, and the 7 day window for, opting-out of the collections process. This means our collections team will be able to start the process faster than before, and work to recover the debt outstanding on your behalf. The opt-out provision was originally included within the terms when the collections process was outsourced, and has been used twice by investors out of a total of approx. 400 loans which have defaulted since 2010. Since bringing this function in house, where we have a dedicated team of specialists working to make recoveries on your behalf, the recoveries estimates have greatly improved: the current actual recovery estimated is 19.3p in the £, in comparison to 9.2p before, and across all loans the estimated recovery within 5 years of default is 40p in the £.

Borrower T&Cs

  • Changes to clause 3 to reflect the move to fixed interest rates for all new loans, where Funding Circle sets the interest rate of a loan before it’s listed on the marketplace.
  • Changes to paragraph 4 of the introduction and clause 3.12 to clarify how the borrower contract works.
  • Change to clause 1.5 – to add a borrower warranty and representation that it does not expect the information provided to change in any material way in the next 6 months, and an undertaking to update us if any information is likely to materially change.
  • Clarification in clause 4.3 that the interest rate stated in Key Contract Terms will not change.
  • Clause 8.4 – changes to clarify that a loan is assigned rather than novated.
  • Change to clause 8.7 to reflect that if we agree a payment plan, we can verify whether you can afford this by requesting information and doing credit checks.
  • Clause 9.2(b) – clarification that we can terminate membership if there is a breach of any security document, a facility letter in connection with property loans or any other documents arising out of the loan made on the platform

Updating our privacy policy

We are also taking this opportunity to simplify our privacy policy. The new policy is shorter, easier to understand and it better explains certain practices (including in relation to when we undertake credit reference checks and how you can contact us). There are no fundamental changes to how we collect and use personal data, we’re just simplifying our documentation.

If you have any questions about the above, please don’t hesitate to contact us and we’ll be happy to help.

Enjoy lending,

The Funding Circle team

Investor evening: meet the co-founders

In the third installment of our investor evening roundup, you can hear from Funding Circle co-founders Samir Desai, James Meekings and Andrew Mullinger who spoke at the recent event hosted at our London office.

They discuss the idea behind Funding Circle, what building a sustainable marketplace means for you, and future plans for the business.

Watch video:

Andrew started off the night by explaining why the three university friends decided to quit their jobs more than six years ago, to plan what would become the UK’s largest marketplace for small businesses loans.

James followed on to discuss how building a sustainable marketplace means having a diverse mix of businesses with thousands of loans, allowing investors to be diversified.

Samir rounded off the evening and talked in depth about raising capital, how lending to businesses across geographies may be possible in the future and gave a quick update on Funding Circle US.

Have you watched our highlights video from the event?

Meet the team: highlights from our third investor evening

Last month we had the pleasure of welcoming investors into our London office. Members of the Funding Circle team gave short updates on recent developments, such as the introduction of the new risk band, and how lending through marketplaces will be included within an ISA wrapper next year.

It proved to be a great forum for debate and feedback, with many interesting and useful points raised – we hope those that attended agree, and many thanks to you for giving up your time to come and say hello.

We appreciate that not everyone is able to travel to London, so we filmed the event and will be publishing three videos on the blog in the coming weeks. The first video, below, shows highlights from the evening and you’ll also hear from other investors about their experience of lending to businesses on the marketplace:

Are you interested in becoming a Funding Circle investor?

It takes minutes to sign up online and you can use our investor information guide to help you get started. We have 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.

 

Small updates to our terms & conditions

We’re making some small changes to our investor T&Cs this week, mainly to clarify how the marketplace works and to comply with regulation. Please see below for details:

Investor terms & conditions

  • Changes to clauses 1.10 to 1.14 to clarify that money must be paid in from, and withdrawn to, a bank account in the name of the Funding Circle account holder.
  • A change to clause 5.1 to clarify that we can make changes to loan conditions in respect of future loans, as long as we notify investors of such changes and they do not adversely affect investors.
  • Changes to clauses 10 and 12 to clarify that any debt collection activity is carried out by Funding Circle Limited.
  • Amendments to clauses 13.2(a) and (e) to make clear that we can, in the interests of all investors, terminate membership of Funding Circle if our marketplace is not being used for the purposes for which it is intended.
  • Some small changes to clause 25 (clauses 25.3 and 25.4) to clarify how we hold client money and how statements are provided.

If you have any questions about these updates please get in touch and we’ll be more than happy to help.

Enjoy lending,

The Funding Circle team

 

Improving our loan communications to investors

Over the last few months we have been looking at how we can further improve the information we share with investors regarding defaulted loans.

As you may be aware, in March we launched a RAG (Red, Amber, Green) rating system, also known as a Traffic Light system, in the Loan Comments in your summary page. Our Collections & Recoveries team provide regular detailed updates on loans currently late or in default where there has been a material development. So far, the feedback we have received from investors has been positive with many telling us they find the RAG system very helpful.

A summary email

As part of our goal to continue to improve communications around defaults, this month we have also started including a summary of your account within your monthly newsletter.

This includes:

– Your average return after fees and bad debts up to the end of preceding month (i.e. June)

– The number of businesses you were lending to

– The number of defaults you experienced in the last month, if any

– The total exposure of your overall investment this represents

This information, together with the RAG rating system will now replace the bad debt communication emails that are sent out each time a default happens. These emails will be phased out over the next month.

Together, these changes provide a regular, comprehensive overview of your account activities. Investors will not receive any less information regarding their accounts than before, as all information regarding loans is included in your summary page. We will continue to default loans on a Thursday and investors can see most recent defaults by reviewing comments in their summary page from noon every Thursday.

Introducing a live Q&A

In addition to these changes, we also want to provide you with a more direct way to communicate with our Collections & Recoveries team. From August, Andrew Jackson, our head of Collections & Recoveries will host a live Q&A every month. He will answer any questions around specific loans you have, and provide you with a general update on the team’s statistics.

If you would like to submit a question, please contact community@fundingcircle.com. Due to data protection, all questions regarding loans must not contain the businesses name, so in your questions, please refer to any business by its loan ID.

The Funding Circle team

 

How can small business owners finance their marketing?

A report released by the Government revealed there are 5.2 million SMEs in the UK. Yet how many are committed to the future growth of their business?

For SME business owners committed to putting growth plans in place, funding these essential steps can often be a cause for concern.

However this needn’t be the case as there are a number of grants available to businesses, some of which also cover the essential marketing spend that goes hand-in-hand with achieving sustained business growth.

Grant support

A grant is a specified amount of money that is given to a business to help with a certain project or purpose. There are a number of grants available from the Government, The European Union, local councils and charities.

You aren’t required to pay the grant amount back, but the competition for grants is high, so you have to make sure your business plan is solid to improve your chances of being considered. (For more information about getting your business plan right, read Cognition’s blog, ‘The Marketing Elements Every Business Plan Should Have To Help Secure Financing.’)

Which grant?

There are a number of different grants available (click here to browse through the different options), all of which come with their own specific access criteria.

However, given a bit of research you’ll find that they are often dependent on the location of your business, the length of time you’ve been trading for, your business turnover and the amount of money you’d like to receive.

For a grant that helps cover your marketing activity there are a number of options available, such as Business Development Grants.

These types of grants can be used in a number of ways to help SME owners grow their business, whether they’re being used for marketing, training, or to purchase equipment. The purpose of these grants is to help relatively established businesses reach that next level, by offering them a one off payment that doesn’t need to be paid back.

Business Development Grants are available from local governments and depend on which county your firm is located. To find about more about them, click here.

You could also consider applying for a Business Growth Service grant, designed to help businesses that have the ambition, capability and capacity to improve and grow. There are a number of criteria you’ll have to pass to be eligible for this type of grant, including having fewer than 250 employees and a turnover less than £40 million. You can find more about this grant, here.

So as you can see, there are a number of options for business owners committed to growing their business, and these are just two of the different types of grants available – there are many more out there. So do your research, and make sure that the grant you apply for supports a marketing strategy that will drive forward your business growth.

By Chloe McHugh, Cognition Agency

You read more tips by downloading any of Cognition’s free eguides.

Cognition is a full-service marketing agency and a Funding Circle borrower. It’s known for its commercial approach, linking marketing activity to revenue and growth.

If you’re interested in taking out a Funding Circle business loan, you can apply online at anytime.

Connecting you with more businesses you’ve lent to. Weekly Lending Review

Week 6: 2 – 8 February 2015

It’s been a fantastic start to February as you helped lend more than £9.4 million to UK businesses last week.

Of the new loans that were listed on the marketplace, construction was the most common sector and expansion was the most popular reason for needing funding.

New loans available to you

There are currently 84 loan requests on the marketplace which are all available for you to lend to.

The total value of new Funding Circle loans was £12,093,060 averaging at £64,324 per loan. The largest loan value was £300,000 and the smallest loan value was £5,000.

Business loans still available for bidding on for the next 3 days or more:

Weekly marketplace trends

These graphs show the most recent activity on the marketplace. 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. Number of loans and value of loans are reported weekly. The dates on the graph should be read as ‘week beginning’, for example: 2-Feb represents the week of 2nd – 8th February 2015.

Weekly average gross yield (2 weeks rolling)

yield

Number of listed loans per week

number

Listed loan value per week

value

30% busier because of your lending

For our first business trip of 2015 we went to Bath to visit Elizabeth Season, co-owner of the Bath franchise of Neal’s Yard Remedies. Anne, who lent to the business alongside 900 other people, came along too. They borrowed £100,000 last year to refurbish their new shop.

News you should know

No update to minimum bid rates for March

Minimum bid rates will remain at their current levels for March:

A+: 6%

A: 8%

B: 9%

C: 10.2%

C-: 12.2%

We’re here to answer the questions you have

Join us on the forum this week to ask your tech and website related questions. We’ll have David T, our VP of Engineering answering them this week.

Loans defaulted last week

Healthcare provider. Loan 6251

This directors of this London business are entering bankruptcy and they are in arrears with their repayments. All affected investors have been notified.

Agricultural supplier. Loan 3276

This Pembrokeshire business has been trading since 2000 and is in arrears. All affected investors have been notified.

IT consultancy. Loan 3409

This London business has been trading since 2009 and the borrower is proposing a CVA (Company Voluntary Arrangement). All affected investors have been notified.

Catering equipment supplier. Loan 2667

This Essex business has been trading since 2010 and is in administration. All affected investors have been notified.

Construction contractor. Loan 1849

This Hampshire business has been trading since 2008 and is in administration. All affected investors have been notified.

Transport company. Loan 1415

This Chipping Norton business has been trading since 2002 and is in arrears with their repayments. All affected investors have been notified.

Our collections and recoveries team are working to recover the outstanding amounts for all of these loans.

Enjoy lending, The Funding Circle Team

 

Meet the co-founders. Weekly Lending Review

Week 2: 5 – 11 January 2015

The marketplace is already filling up with over 50 new lending opportunities available to you right now. Of the new businesses that came to the Funding Circle marketplace last week, the majority were in the property and construction sector. The highest proportion of prospective borrowers were located in the Midlands.

New loans

There are currently 51 auctions on the marketplace which are all available for you to lend to.

The total value of the new listed loans was £8,579,720 averaging at £63,553 per loan. The largest loan value was £337,000 and the smallest loan value was £5,000.

Business loans still available for bidding on for the next 3 days or more:

Weekly marketplace trends

These graphs show the most recent activity on the marketplace. 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. Number of loans and value of loans are reported weekly. The dates on the graph should be read as ‘week beginning’, for example: 5-Jan represents the week of 5th – 11th January 2015.

Weekly average gross yield (2 weeks rolling)

yield

Number of listed loans per week

number

Listed loan value per week

value

No update to minimum bid rates for February

We review the minimum bid rates in the middle of every month to decide whether they should be changed or kept the same. This month, we are keeping minimum bid rates for February at their current levels:

A+: 6%

A: 8%

B: 9%

C: 10.2%

C-: 12.2%

Meet the co-founders

In the final instalment of our November investor evening round up, and following on from the property focus video, we hear from co-founders Samir Desai and James Meekings.

 

Enjoy lending, The Funding Circle Team

 

How to get a high speed broadband grant for your business

Did you know that your business could get a voucher of up to £3,000 for faster, better broadband through the Government’s Broadband Connection Vouchers scheme?

How could your business benefit?

There are a number of benefits of using superfast broadband, including:

  • The ability to do things faster so you can increase your productivity
  • Improving your customer experience
  • Granting you access to new markets

What does the grant cover?

If you’re eligible for this grant, you could receive up to £3,000 to cover the installation costs of upgrading to a faster and more reliable connection for your business. You could get a fiber optic, cable or wireless broadband connection and most businesses pay nothing but VAT and their standard monthly charge.

Find out instantly whether your area is covered in the scheme

All you need to do is enter your postcode into the eligibility checker and you’ll find out instantly whether your business is in the catchment area.

Time is running out, so make sure you visit the Connection Vouchers website to find out if your business is eligible before it’s too late!

 

Funding Circle launches first ever national TV advertising campaign

Today is an exciting day at Funding Circle as we launch our first ever national TV advertising campaign. This move represents a big step for everyone involved in the company and will help to raise awareness of the Funding Circle marketplace to business owners here in the UK.

To mark the launch, James Meekings, co-founder of Funding Circle said;

“We’re building a business at Funding Circle that is changing the global financial infrastructure. This campaign is a natural next step for us as we continue to build trust and credibility for the brand, and enables us to tell our story in a creative and exciting way.

The team at Karmarama have created a campaign which explains how we operate in visually striking and beautiful way – and we’re looking forward to seeing the results”.

The 30 second advert will run across national TV channels and you can view it here. You can also see a 60 and 10 second version of the advert on our YouTube page, and watch a short video showing how the advert was made.

We hope you enjoy them!

The Funding Circle team