Video. The urban spa that’s healing with your help

January is a big month for fitness and health kicks, so if you’re digging out the gym pass or reaching for detox smoothies, we’ve got someone we’d like you to meet. Martha Mary is a business owner in Manchester. With a passion for healing and a mission to bring healing to the high street, she founded Urban Oasis day spa in 2004. 

With locations at Debenhams and the Hilton in central Manchester, Urban Oasis offers treatments ranging from massages and reiki to nails and lashes. As well as keeping up with the demands of running the business, Martha Mary still takes time to perform treatments herself. Although the workload can be intense, her love for what she does keeps her going. “You’ve got to have a lot of energy, empathy and patience. I love what I do and I’m very passionate about it. Trying to make a difference and do something positive with my life – that’s what really drives me.”

Thanks to Funding Circle investors, Urban Oasis took a loan to get a new accreditation, train staff and buy new equipment. Watch the video below to learn more about her passion and the challenges of running a small business. 

ISAs – a complete guide

ISAs have had a shake up in the last few years, giving you more choice and potential rewards. To help you understand the options available, below you’ll find details on the different types of ISA, how they work and key points to be aware of. Always remember that tax rules depend on your individual circumstances and may change in the future.

What is an ISA?

ISA stands for Individual Savings Account. They allow you to earn interest on your savings or investments tax-free. The amount you can put into your ISA is capped for each tax year, for 2018/19 and 2019/20 it’s £20,000. This is called your ISA allowance.

You can choose to split your ISA allowance across different ISAs, or put it all in one. How you choose to do this can make a big difference to your earnings.

What types of ISA are there?

There is a variety of ISAs to suit different risk appetites and life stages. You can choose from a Cash ISA, Stocks & Shares ISA, Innovative Finance ISA (IFISA), Lifetime ISA (LISA) and Help to Buy ISA. There’s also a Junior ISA to help you save for the kids.

You can only pay into one of each type of ISA in any tax year. Each has different benefits, so it’s important to understand how they work.

Cash ISA

A Cash ISA works like a savings account, only all the interest you earn is completely tax-free. As with savings accounts, there’s a whole host of Cash ISA providers and options out there, such as instant access, fixed-rate or regular savers. Most are free to set up, but some may charge to withdraw.

Although you may earn a lower interest rate with a Cash ISA than a Stocks & Shares ISA or Innovative Finance ISA, they are very low risk. Your money is also protected by the Financial Services Compensation Scheme, which will compensate you up to £85,000 if you lose your money. However, if the interest rate offered is below inflation, you could be losing out in real terms.

Stocks & Shares ISA

You can also use an ISA to earn tax-free interest on investments. These Stocks & Shares ISAs will normally be managed using an app, online platform, broker or fund manager.

Your money could be invested in shares in public companies, bonds (essentially a loan to a company or government) or funds (a mixture of investments pooled together).

These types of investment can give you higher returns than you’d get with a Cash ISA, but they carry more risk. Although the interest is tax-free, your investment could go down as well as up.

There are often more fees associated with a Stocks & Shares ISA as well. Providers may charge you for opening an ISA, changing investments, withdrawing or transfering to another ISA provider.

Innovative Finance ISA

Innovative Finance ISAs allow you to earn tax-free interest by lending to people or businesses. There are a variety of online providers (often known as peer-to-peer lenders or lending platforms) that will focus on different groups. Some only lend to individuals, others to property developers, and some like Funding Circle that lend to small UK businesses.

As you’re lending your money, there’s a risk that the loans won’t be repaid. Providers mitigate this risk in different ways, such as spreading your funds across multiple loans.

As you’re lending your money, there’s a risk that the loans won’t be repaid. Providers mitigate this risk in different ways, such as spreading your funds across multiple loans.

Consequently, Innovative Finance ISAs typically sit somewhere between Cash ISAs and Stocks & Shares ISAs. They typically offer better returns than Cash ISAs and savings, but are more stable than playing the stock market.

With the Funding Circle ISA you could earn a projected return of 6-7% per year*. Find out more. Capital at risk.

Help to buy ISA

Help to buy ISAs are a type of Cash ISA made for first-time house buyers. You can save £1,200 in the first month, then £200 per month from then on. When you’re ready to buy your property, the Government will then add 25% as a bonus (up to £3,000).

As they are a type of Cash ISA, you can’t pay into both a Cash ISA and a Help to buy ISA in the same tax year. If you’ve opened your Cash ISA this year, you can transfer the funds to your Help to buy ISA. If you have more than £1,200 in there, you can transfer the rest elsewhere.

Lifetime ISA

Like the Help to buy ISA, a Lifetime ISA can help you at important life stages. It can also help you buy your first home, or you can keep it open and use it for retirement.

You can deposit up to £4,000 per year and get a 25% bonus from the state. The bonus is paid monthly (if you make a deposit that month), and once it’s in your account it counts as your money, so you can earn interest on it too. You have to be between 18-39 to open one, and you’ll get contributions up to the age of 50.

If, however, you take the money out for anything other than buying your first home or retirement, there is a penalty of 25%. That leaves you around 6% down overall. It sounds counterintuitive, but here’s an example to show how it works:

£4,000 + 25% = £5,000

£5,000 – 25% = £3,750

How can I use my ISA allowance?

The ISA allowance is set every year. It’s risen from £7,000 in 1999 to £20,000 in 2019. While there used to be rules on how you can split your ISA allowance, now there’s more freedom.

As mentioned above, there are limits to how much you can put in a Lifetime ISA or Help to buy ISA. Aside from that you can choose to spread your £20,000 however you’d like to. You can put it all in one ISA, or spread it among a few.

Remember, if you choose to spread it out, it’s your responsibility to make sure you don’t go over your £20,000 ISA allowance in total. Providers will usually make sure you don’t exceed the limit in any one account, but they won’t know what ISAs you have elsewhere.

Any interest also won’t count towards your personal savings allowance. This is another allowance which lets you earn £1,000 of interest on savings each year without paying tax (£500 for higher tax rate payers). So if you have a lot of savings earning interest, an ISA will help you keep more of it tax-free.  

How do I get my money out of an ISA?

The rules for taking money out of your ISA depend on the type and provider you have. There is no set time period you need to start enjoying the tax-free benefits. However, some products may have fees for withdrawing or closing your account early.

Unless you have a flexible ISA, once you’ve taken out funds you can’t put them back in.

What is a flexible ISA?

With a flexible ISA, you can take money out and replace it within the same tax year without it affecting your tax-free ISA allowance. Here’s some examples to show how it works:

Judy has a flexible ISA. She’s paid in £20,000 already this year, using her whole allowance. She takes out £10,000 to buy a car, but because she has a flexible ISA she can pay the £10,000 back in before the April 5th deadline.

John has a non-flexible ISA. He’s also paid in £20,000 this year. He takes out £8,000 to redo his kitchen, but he can’t pay in any more until the next tax year.

Tina also has a non-flexible ISA. She’s paid in £5,000 this year, leaving £15,000 of her allowance left. She takes out £2,000 for a family holiday, but can still only pay £15,000 back in.

Whether an ISA is flexible or not depends on which ISA you have. Cash ISAs, Innovative Finance ISAs and cash in a Stocks & Shares ISA can all be flexible, but it depends on the provider.

Help to buy ISAs, Lifetime ISAs and Junior ISAs are not flexible.

When is the deadline for using my ISA allowance?

You must use your ISA allowance by April 5th to get the tax benefit for that year. The allowance does not roll over, so you will lose it if you don’t take advantage. From April 6th onwards it will be a new tax year with a new ISA allowance that you can use. The previous year’s allowance, however, will be gone.

Who is eligible for an ISA?

To be eligible for an ISA, you must:

  • Be 16 or over (18 or over for Innovative Finance ISA and Stocks & Shares ISA)
  • Live in the UK
  • Have a national insurance number

You can only take out an ISA in your own name. Joint ISAs with a friend, partner or relative aren’t allowed.

Can I transfer ISAs?

You can transfer ISAs from both the current tax year and previous years to a new provider. Just like your bank account or household bills, switching providers can help you get the best rates.

When transferring ISAs there are two important points to remember:

1 – Don’t withdraw the money yourself – speak to the new provider about a transfer

Transferring an ISA is not as simple as withdrawing from your bank account and depositing somewhere new. If you withdraw the money yourself, you can lose your tax benefit. Instead, speak to your new provider and ask them for an ISA transfer form. Normally they will then arrange the transfer for you.

As mentioned above, Stocks & Shares ISAs often charge a fee for transfering, withdrawing or closing an ISA.

2 – You can only pay into one of each type of ISA in any tax year

If you want to transfer a ISA from the current tax year, you’ll have to move all of it to the new provider. However, for ISAs from previous years, you can either move them all into one or split them across several providers.

What is a Junior ISA?

If your child is under 16, you can open a Junior ISA (JISA) for them instead. They only get an allowance of £4,260 at the moment, but if you open one when they’re born they’ve got plenty of years to rack up interest. You have a choice of Cash or Stocks & Shares, and you can divide the allowance between the two.

Although it’s in their name, the ISA is opened and managed by you. They can take over when they reach 16, but they can’t touch the cash until 18. Once they turn 18 though it’s their money to do want they want with.

The Funding Circle ISA

The Funding Circle ISA is an Innovative Finance ISA. By using the simple online platform, you can quickly lend to hundreds of small UK businesses. They get the money to grow and create jobs, and you can earn interest as they pay you back each month.

You can earn a projected return of 6-7% per year*. It’s a flexible ISA, so you can take money out without losing your tax-free allowance, and you can transfer ISAs from other providers.

Find out more about the Funding Circle ISA here.

By lending to businesses your capital is at risk. Tax rules depend on your individual circumstances and may change. Not covered by the Financial Services Compensation Scheme.

*The rates shown are the annual projected returns, after fees and bad debts but before tax, that a diversified investor could earn with the Balanced lending option. Your actual return may be higher or lower than projected, for example due to the performance of the individual loans your funds are matched with, or a change in macroeconomic conditions.

The information and views contained here are provided solely for informational purposes and should not be construed as legal, tax, regulatory, accounting or investment advice, or as a recommendation or an offer or invitation by Funding Circle.

To the extent permitted by law, Funding Circle does not accept any liability for any loss or damage which may arise directly or indirectly from the use of, or reliance on, such information contained here. If you have any questions, please speak to your professional adviser or seek independent specialist advice.

Looking back on the last three months: October – December 2018 review

Happy New Year! As we look forward to what 2019 has in store, we wanted to take a step back and celebrate what investors like you have achieved. As part of this, last week we updated our statistics page with our lending and performance figures up to 31st December 2018. Read on to find out more.

You’ve helped a record number of small businesses grow

Between October and December last year, investors lent £680 million to small businesses across the UK, US, Germany and the Netherlands; bringing the total lending for 2018 to approximately £2.3 billion.

In the UK alone, more than £440 million was lent to UK small businesses between October and December. Alongside 79,000 investors, in 2018 you lent more than £1.5 billion to UK businesses. When you remove repayments received this year from that figure—what we call net lending—you have provided approximately £725 million of new funding to businesses all over the UK, an incredible achievement!

More of our key lending figures can be seen below:

You help all types of businesses from all over the UK

By lending through Funding Circle you make a huge difference to all kinds of businesses throughout the UK. With your help they’re able to grow, create jobs, develop new products and support local communities. Below is a breakdown of the sector and location of the UK businesses currently accessing finance through the Funding Circle platform.

 

An update from our Chief Risk Officer

In December our Chief Risk Officer, Jerome Le Luel, provided his insight into how the macroeconomic environment has impacted loan performance in the markets Funding Circle operates in, and what we have done to help ensure you continue to earn attractive returns. In the UK, loans taken out since 2012 are projected to deliver returns of between 4.7 – 7.3% per year, after fees and bad debt.*

Although the economic environment for small businesses in the UK remains strong, the outlook for consumer credit in the UK has worsened in recent years. This has impacted a small population of loans in our higher risk bands who can be more susceptible to shifting trends in the consumer credit environment. These headwinds are reflected in the projected returns for our 2016 and 2017 cohorts, the most recent of which can be seen on our statistics page. You can read Jerome’s update in full here.

We’re excited for the year ahead

We’re looking forward to what 2019 will bring. Following our public listing on the London Stock Exchange last year, we believe we’re in a strong position to help you lend to more small businesses than ever before, earning an attractive return while helping the UK economy to grow. Remember, by lending to businesses your capital is at risk, and your funds aren’t covered by the Financial Services Compensation Scheme.

Enjoy lending,

The Funding Circle team

*Projected returns for loans taken out in the UK between 2012-2018, as of 31st December 2018. The projected annualised return shows the return, after fees and bad debt, that loans are currently estimated to achieve. Loans are shown by the year they were taken out. The return is calculated by combining the actual annualised return received to date, and our latest return estimates, including expected recoveries, for the remaining term of loans that have not yet been fully repaid. Past performance is not a guarantee of future returns and by lending to businesses your capital is at risk.

Our Business Champion programme is a year old

Funding Circle Business Champion

At Funding Circle we’ve always valued our introducer community and the relationships we have with them. They are an integral part of our business and have played an important part in helping us get where we are today.

Now a year old, we created the Business Champion programme to give new opportunities and support to introducers who want to work closely with us. The programme is open to introducers of all shapes and sizes. We are looking for introducers that provide high quality business, show commitment to Funding Circle, provide great customer outcomes and are efficient to work with.

In return, we provide them with a unique offering that differs from anything else in the market. First and foremost, we provide a best-in-class service with faster decisions and personal support. By working closer together, we can help them say yes to more clients, more often.

What’s more, we also work with introducers to help grow their own business. By giving access to our marketing expertise and resources, we deliver campaigns and run analysis to attract and retain more clients.

Giving introducers the opportunity to grow and reach their full potential is at the heart of the Business Champion programme. Not only does it help us and our introducers, but benefits their clients and Funding Circle investors too.

2018 was an amazing year for our Business Champions, with record breaking quarters for lending and fantastic feedback on the new service. We’ve also continued to evolve the programme adding new benefits throughout the year.

Business Champions now receive:

  • Business Champion branding
  • £500,000 max loan size
  • Commission up to 6%
  • Funding Circle fees capped at 3%
  • Marketing support
  • Decision typically on the same day*

*When application is fully submitted with all documents before 1pm

Being a Business Champion is a mark of quality for introducers. It recognises their expertise and all the work they do to keep clients satisfied, as well as the quality of business they have provided to Funding Circle and investors.

We’re delighted with the success the programme has seen in its first year already, and we’ll keep forging stronger relationships that can help our introducers fly!

Are you a commercial finance broker looking for a fast, affordable funding solution for your clients?
Get in touch with our dedicated Introducer team at introducer@fundingcircle.com or give us a call on 020 3667 2208.


 

Introducing an improved and simplified Summary page

At Funding Circle, we want you to have a clear and simple view of your portfolio. As part of this, we have redesigned your Summary page and are excited to announce this is now live.

We have redesigned the Summary page to provide a snapshot of your account, with more detailed information easily available. The video guide below provides an overview of how you can navigate around the new pages to access all the information you need.

 

Providing a clear view of how your account is performing

Previously, we showed investors three different returns: gross yield, an annualised net return and an estimated fully diversified return. We have received feedback that showing three returns can be confusing, so to make this simpler you will now only see one return in your account, an annualised return.

The annualised return represents how your account is currently performing and is calculated after fees and bad debt. This links directly to your investment earnings and will help you to evaluate how your account has performed since you started lending through Funding Circle. The return is calculated in the same way as the previous annualised net return.

It’s worth remembering that your annualised return will change over time. Data at Funding Circle shows bad debt rarely occurs evenly over an investment period, and is typically concentrated during certain periods of a loan’s life. This means returns generally will dip, then begin to increase as recoveries arrive. You can read more about how returns change over time on our blog.

We have withdrawn the accrued interest figure

Your accrued interest is the interest that has built up, but not yet been paid, since the last payment by a borrower. As this is not money that has been actually received, this figure has now been withdrawn to provide a simpler view of your portfolio total. It is still possible to view the amount of interest due for each loan part via your repayment schedule.

If you have any further questions, please feel free to contact us. Remember, by lending to businesses your capital is at risk.

The Funding Circle team

Chief Risk Officer’s Update – December 2018

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

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

The economic environment has created favourable lending conditions

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

1. GDP growth %, year on year

Source: Federal Reserve, ONS, OECD

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

2. Central bank interest rates

Source: Federal Reserve, BoE, ECB

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

3.Unemployment rate

Source: Federal Reserve, ONS, ECB OECD

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

4. Small business insolvencies (Q1 2008 = 100)

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

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

5. Consumer insolvencies (Q1 2008 = 100)

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

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

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

 
Source: BoE

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

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

Loan performance has been strong

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

Projected returns* after fees and bad debt, all markets

Source: Funding Circle

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

US

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

Projected returns after fees and bad debt, US


Source: Funding Circle

 

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

UK

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

Projected returns after fees and bad debt, UK

Source: Funding Circle

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

Germany

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

 

Projected returns after fees and bad debt, Germany

Source: Funding Circle

Netherlands

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

 

Projected returns after fees and bad debt, the Netherlands

Source: Funding Circle

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

The outlook for the economic environment is encouraging

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

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

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

We are confident returns will remain resilient through a recession

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

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

 

2018 Funding Circle stress test results

Source: Funding Circle Stress Test 2018.

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

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

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

Jerome Le Luel

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

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

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

VIDEO. Three thriving Scottish businesses, thanks to your support

The patron saint of Scotland, St Andrew was known for being strong, sociable and fair. Characteristics that Scots are proud to stand for, they celebrate St Andrew’s Day with acts of kindness and good deeds on the 30th November each year.

Whether you’re dancing a ceilidh, hiking around Loch Lomond or just knocking up some tatties and neeps, it’s a day to enjoy all things tartan. Plus as an official holiday, you get the day off work if you’re north of the border.

To join the celebration, we visited three thriving Scottish businesses: The Good Spirits Company, Alex McDougall Mowers and Highland Wi-Fi. All three businesses have been able to go further, thanks to the fantastic support of Funding Circle investors.

In this video you’ll meet Calum, Alex & Shirley and Matthew. They talk about why they’re proud to be a Scottish business and how support from Funding Circle has helped them achieve their business goals.

Want to lend to more businesses like this?

To help even more businesses get the funds they need to grow, sign in to your account and add more funds today. Remember, by lending to businesses your capital is at risk.

Introducing the Funding Circle Android app

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

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

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

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

Enjoy lending,

The Funding Circle team

Top present ideas from businesses you’ve helped

Looking for some inspiration for presents this Christmas? Below you will find seven dazzling and delicious gift ideas to wow your loved ones. These fantastic companies have all been able to succeed thanks to your lending.

Inside out toys

Are you struggling to think of something to buy the little ones? Inside out Toys sell branded children’s toys on Amazon and Ebay; providing endless hours of amusement and important learning tools.  They are a family owned company; established in 2011 by Nicki and Julian Garner. They have borrowed over £460,000 across seven loans to develop their ‘jumini’ wooden toy range and to purchase more stock.

Enjoy travel

Is your loved one obsessed with travelling? Or perhaps they just need a break away? Make sure you check out Enjoy Travel and their amazing deals. They are a fully licenced tour operator who specialise in finding you your perfect break away. Gerry and his team pride themselves on providing the most enjoyable, memorable music-filled holidays available. With thanks to your investment , Enjoy Travel has been able to create several new music festivals across Europe, including their latest ‘Celtic on the Coastas’ which has just been launched.

Wine Discovery

If you haven’t bought the perfect gift for the wine lover in your life, don’t worry! You can book a relaxing wine tasting event at their home or chosen venue from Wine Discovery Limited. Weather they are looking for an introduction to wine tasting or just want to spend time with friends this is the perfect gift. Their prices start from £25.00 per person; offering a range of different experiences. The company borrowed £6,000 in 2017 to improve their website and buy additional stock.

Bedale Beauty

Looking to push the boat out when it comes to your Christmas shopping this year? If you are on the hunt for something memorable, then check out the treatments available at Bedale Beauty in North Yorkshire. They opened in 1992 and are known locally for their high standard of treatments, product ranges and customer service. They offer the perfect range of Gift Sets; ranging from make up collections, bathing products and many more. The team borrowed £25,000 from investors to push forward with their expansion plans and change the layout of the salon.

Grasmere Chocolate Cottage

Christmas time calls for some festival indulgence- so why not celebrate in style by purchasing a chocolate box from Grasmere Chocolate Cottage Limited! Their aim is to create culinary and visual delights worthy of their iconic Lake District surroundings.  Richard and Angela Barker managed to expand their premises and staffing with a £30,000 loan. Their chocolate goodies are all handmade, so make sure to check them out!

Red Star Brewery

Instead of spending Christmas at your local, surprise your Dad by booking a unique beer tasting experience at Red Star Brewery in Merseyside. The company was formed in 2015 by two friends with the aim to produce ales using the finest hops from around the world. They have since gone on to export beers as far as Serbia and won two gold medals at the 2015 NW Siba awards. The team borrowed £10,000.00 to purchase 150 casks to keep up with their demanding customers.

What the budget means for you – Jasmine Birtles

If you were hanging on to Phillip Hammond’s every word on Monday 28th October, waiting to hear what changes he would be making for investors, you probably came away disappointed…or relieved.

Because frankly, this year’s Budget had remarkably little news for investors and savers.

In the main that was a good thing. In the run-up to the Budget analysts were widely predicting a raid of the pensions annual allowance and possibly a reduction in the ISA limits and changes to IHT exemptions. But no. Silence on all counts. It was largely a giveaway Budget with very little clawed back by the Chancellor – particularly for investors.

ISAs

For the tax year 2019/20 the annual ISA allowance remains at £20,000, and pension investors can still stash away £40,000. Neither are to be reduced which is a huge relief for anyone looking to build their retirement savings. Combining the two, which many investors do in order to make the most of their tax advantages, these allowances enable most people to invest in a nest egg tax-efficiently.

Also if you are an ISA investor who holds Alternative Investment Market (AIM) shares you can breathe a sigh of relief too. Since 2013, AIM shares have been allowed in ISAs, enabling ISA investors to create portfolios that are free of inheritance tax as well as income and capital gains tax. Investors will be glad not to have lost this in the last Budget.

There is also a positive move for parents investing for their children. The annual subscription limit for Junior ISAs for 2019-20 will be uprated in line with inflation to £4,368.

Income tax

The thresholds for income tax are also being tweaked. Continuing the government’s policy of the last few years, the personal tax free allowance is edging up, as is the higher rate tax threshold. Here’s what they’ll be for 2019/20:

Personal allowance – £12,500

Basic rate (20%) – £12,500-£50,000

Higher rate (40%) – £50,000-£150,000

Additional rate (45%) – £150,000+

For those earning over £100,000, the personal allowance works a bit differently. For every £2 over £100,000 that you earn, your personal allowance will be reduced by £1. So, if you earn £125,000 or more, you’ll have no personal allowance and will have to pay income tax on all of your earnings.

Stock market investing

There was little for stock market investors in this Budget, but some of the chancellor’s ideas will have an impact.

“Investors breathed a sigh of relief as the Chancellor maintained the status quo in terms of allowances,” says Moira O’Neill from Interactive Investor. “For example, over the years, chancellors have been fond of meddling with venture capital trusts and enterprise investment schemes, which grant investors appealing tax advantages for investing in early stage companies. But no sign of more with these regimes in this Budget.”

Last year there were unexpected cuts to the dividend tax allowance, which was reduced to £2,000, but the Chancellor did not wield the axe further this time. It was hoped that he might have reversed the cut this year and it was a shame that he didn’t, but at least it wasn’t increased.

The tax advantages of shares listed on the Alternative Investment Market (AIM), London’s junior market, were expected to be in the Chancellor’s line of fire, but also escaped.

Savings

In the ‘small print’ of the Budget announcement we heard a few bits of good news for savers.

For a start the minimum investment required to hold Premium Bonds will fall from £100 to just £25 by the end of next March, which will be welcomed by small savers and those who like to give Premium Bonds as a gift to children and grandchildren.

Also, the criteria for buying bonds as gifts for children under 16 will also be loosened going forward. The new rules say that aunts, uncles and family friends are now going to be allowed to gift bonds worth up to £50,000 per child. Currently they can only be bought by parents, grandparents and legal guardians. National Savings & Investments will release further details of these changes later.

Still on the subject of saving for children, a consultation on draft regulations for maturing Child Trust Fund accounts will be published next year, as announced in the Budget. These were launched in 2002, but were then superseded by Junior ISAs in 2011. The Budget also included news that the annual subscription limit for Child Trust Funds for 2019-20 will be uprated in line with consumer prices index to £4,368.

For more information

To find out more about the Funding Circle ISA visit fundingcircle.com/innovative-finance-isa.

By lending to businesses your capital is at risk. The tax-free entitlement of an ISA depends on your individual circumstances and may change.

The views expressed here belong to the author and do not represent those of Funding Circle. Funding Circle is not authorised to, and does not, provide investment, tax, legal or regulatory advice.

The information and views contained here are provided solely for informational purposes and should not be construed as legal, tax, regulatory, accounting or investment advice, or as a recommendation or an offer or invitation by Funding Circle.

To the extent permitted by law, Funding Circle does not accept any liability for any loss or damage which may arise directly or indirectly from the use of, or reliance on, such information contained here.

If you have any questions, please speak to your professional adviser or seek independent specialist advice.

Your autumn review

By lending through Funding Circle you make a huge difference to businesses throughout the UK. With your help they’re able to grow, create jobs, develop new products and support local communities. Thank you for your continued support – you’re helping drive the UK economy forward! Read on to find out more in your spring review. 

Autumn review – lending figures

Between July-Sept 2018 you and other investors helped thousands more businesses get the finance they need to thrive.

Spring review - lending figure

*In July-Sept 2018, new loans made through Funding Circle helped unlock 3,540 jobs across the UK.

July-Sept sector breakdown

The industries you have been lending to:

Industry breakdown

 

July-Sept 2018 regional breakdown

Your lending has been helping every region throughout the UK: 

Regional breakdown

More on your impact

For more detail on how your lending is helping businesses throughout the UK, check out our blog on how you’re helping the economy grow, or you can sign in to your account to add funds

By lending to businesses your capital is at risk.

Enjoy lending!

The Funding Circle team

£1 billion lent through our Introducer team

2018 has been an incredible year at Funding Circle. A few weeks after listing on the London Stock Exchange, we’re proud to announce that our Introducer team has reached the milestone of £1 billion lent since it was formed in 2012.

To mark this occasion, we spoke to Luke Hultquist and Stuart Sterling from Halo Corporate Finance, one of the first introducers to work with us when we launched the Introducer channel.

Find out why Luke and Stuart choose to regularly introduce clients to Funding Circle in the video below. Our Head of Broker, Tom Shave, also discusses what’s coming up in 2019 and reveals the long term vision for the broker channel.

As our introducer network continues to grow across the UK, we’ll be able to help even more businesses access finance, supporting the economy and creating jobs.

Are you a commercial finance broker looking for a fast, affordable funding solution for your clients?

Get in touch with our dedicated Introducer team at introducer@fundingcircle.com or give us a call on 020 3667 2208

Helping more investors build a well-diversified portfolio

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

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

Helping investors with smaller portfolios diversify

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

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

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

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

Enjoy lending,

The Funding Circle team

Our new partnership with Just A Card

 

Funding Circle was born from the belief that when small businesses succeed, everyone benefits. I’m proud that we have been able to help more than 42,000 British small businesses to get finance through Funding Circle since 2010. However, we know times are tough for independent businesses across the country, which is why I am delighted to announce that we’ll be supporting the Just A Card campaign.

Just A Card is a not-for-profit campaign run by the incredible Sarah Hamilton and her amazing team of volunteers up and down the UK. For the last three years, Just A Card has been working hard to help small businesses get vital extra sales by encouraging people to make a purchase – however small – through their window stickers, pins and posters. And it’s working! Independent retailers who have joined the campaign say that just reminding shoppers of this fact – that every sale counts – is making a difference. This simple yet powerful message highlights what we need to do to ensure our high streets remain full of thriving independent businesses instead of boarded up shops.

How it started

“I had a light bulb moment three years ago” tells Sarah, who founded the campaign “I read a quote from store owners who’d just shut up shop – “if everyone who’d complimented our beautiful gallery had bought ‘just a card’ we’d still be open”. I realised then that if we value our independent businesses, it’s not enough just to talk about them. We have to take action to support them.

I firmly believe that people cherish independent businesses and want to support them. However, sometimes they simply don’t recognise how valuable every purchase is. We’ve now got 3,000 businesses supporting our campaign with window stickers across the country. With Funding Circle’s help, we’re going to treble that number to over 10,000 by the end of the year. I’m so excited to be working with Funding Circle because they are just as passionate about supporting small businesses as we are.” 

Support independent businesses this Christmas

We’re going to be sending a window sticker pack to all the relevant small businesses in the Funding Circle community, encouraging them to support the campaign. Particularly in the run-up to Black Friday and Christmas, we want people to support their local independent shops, bookstores, cafes and businesses.

So watch out for a very special envelope landing on your doormat early next month. Display your window sticker with pride or pass it on to a local business, and do get involved with ‘Just A Card Indie Week’ November 19 – 23, by following @fundingcircleUK and @justacard on Instagram or visit justacard.org for more details.

James Meekings – Funding Circle Co-founder and UK MD.

Add funds to get an iPad

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

What gift can I claim?

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

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

What do I need to do?

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

Can I use my ISA and Classic accounts?

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

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

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

Make sure your address is up to date

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

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

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

Enjoy lending!

The Funding Circle team

Saving for university – by Jasmine Birtles

Jasmine Birtles is a TV and newspaper journalist and personal finance expert. In her new column she’ll be helping you get the most from your investment and reach your personal goals.  

Passing the exams is the easy part. It’s saving for university that really hurts!

It costs the best part of £45,000 to do a three-year degree in the UK right now. That’s set to go up to at least £60,000 in the next ten years. So it’s not surprising that some parents start saving for their children’s university as soon as, or even before, their children are born.

However, even if you don’t have serious spare cash to put aside for your offspring’s education, there are ways to maximize the money you put in. Follow these steps and you’ll be able to help your kids even with limited resources.

Make full use of the JISA

Obviously the more tax you can save on your investments the better, so use ISA allowances as much as possible when saving for university.

Each child has an annual JISA (Junior Individual Savings Account) limit of £4,250 per tax year until they turn 18. Even if you don’t have that much to put in each year, just investing regular, small amounts each month will mount up if you put it in the right products.

Happily, children have time on their side when it comes to investing. If you start when they’re babies they have a good 18 years for the investment to grow, so you can use a stocks and shares (equity) JISA for them. The returns on these products are much higher than you would get on the average bank or building society cash version. Simple index tracking funds tend to be the cheapest and often the best performing. Encourage the grandparents, friends and other family members to add to the pot at birthdays and Christmas.

Of course, the JISA is in your child’s name and it’s not certain that they will use it for university by the time they get their hands on it at age 18. But if you spend some time educating them in the value of saving and help them to respect money then, even if they don’t go to university, they will still know to put that cash into something sensible once they come of age.

Take out your own Innovative Finance ISA

You also can take out an ISA for yourself and you have an annual limit of £20,000 per tax year. There are a few ISAs to choose from now including the Innovative Finance ISA which enables you put money into an online lending platform, such as Funding Circle, within an ISA wrapper. So any gains you make with your lending come to you tax-free.

If you put your money into the Funding Circle ‘Balanced’ ISA, that has a projected return of 6-7%. Then a monthly deposit of just £170 at 6% annual return, would give you £66,000 in 18 years, and that doesn’t even use up your whole ISA allowance.

Beware of ‘specialist’ products

There are, of course, investment products specifically designed for parents looking to save for their child’s university costs. Some of these may do well but on the whole you should be suspicious of any financial product that has clearly been packaged up for, and advertised to, a particular market. These products often have high fees attached to them and tend to be more about the marketing than the market.

Some Friendly Societies offer specialist products like these but their fees tend to be high. Similarly, well-known investment firms offer specialist products that involve a choice of managed investment trusts that you could put your money into. Usually the minimum monthly investment is £25 or £250 one-off lump sum. Again, though, watch their fees as managed funds are generally more expensive than simple index-tracking funds.

Get the kids saving for university too

One of the best ways to help your kids cope financially when they get to university is to encourage them to earn and save while they are teenagers. They really need the help too, as research by the savings association TISA has found that three in five 14-16 year olds borrow money to pay for something, even though four in five of those surveyed receive pocket money and a third of them have a part time job.

So start by helping them get a Saturday job in a local tea shop, car wash or supermarket. Help them fill in application forms, take them to the interview and even contact potential employers yourself. Then help them set up their own savings accounts, showing them how their money can grow over time if they leave it there. If you have the money you could even promise to match any savings they accumulate once they get to university.

For more information

To find out more about the Funding Circle ISA visit fundingcircle.com/innovative-finance-isa.

Your actual return may be higher or lower and your capital is at risk. The tax-free entitlement of an ISA depends on your individual circumstances and may change.

The views expressed here belong to the author and do not represent those of Funding Circle. Funding Circle is not authorised to, and does not, provide investment, tax, legal or regulatory advice.

The information and views contained here are provided solely for informational purposes and should not be construed as legal, tax, regulatory, accounting or investment advice, or as a recommendation or an offer or invitation by Funding Circle.

To the extent permitted by law, Funding Circle does not accept any liability for any loss or damage which may arise directly or indirectly from the use of, or reliance on, such information contained here.

If you have any questions, please speak to your professional adviser or seek independent specialist advice.

Funding Circle lists on the London Stock Exchange

We are pleased to announce that we are now a public limited company (plc) and are listed on the London Stock Exchange. This is the next stage in our exciting journey to help thousands more small businesses access the finance they need to grow, and to provide investors with a better deal.

Today’s news is an exciting moment for the company, but we wanted to reiterate that your lending experience will not be affected in any way.

If you have any questions about your experience at Funding Circle, please get in touch.

Enjoy lending,

The Funding Circle team

News

Update on Funding Circle’s next stage of growth

This is an advertisement and not a prospectus. Potential investors should not apply for or buy any shares in Funding Circle Holdings Limited (to be renamed Funding Circle Holdings plc) (the “Company”) except on the basis of information contained in a prospectus that may be published by the Company and which, if published, will be made available at corporate.fundingcircle.com.

 

Important Funding Circle update

 

Since Funding Circle launched 8 years ago, investors on our platform have lent more than £5 billion to over 50,000 businesses globally, earning attractive returns whilst supporting economic growth and job creation across the UK, US, Germany and the Netherlands.

Today we have announced the next stage of our growth and we’re delighted to confirm that we are considering proceeding with an initial public offering (IPO). This means Funding Circle’s ownership structure would change from a private company to a publicly listed company.

What this means for you

Should we decide to proceed with an IPO, there will be no impact on your existing relationship with Funding Circle. Additionally, we anticipate that you will have the opportunity to apply to participate in the IPO and become a shareholder in Funding Circle via an intermediaries offer.

Further information on this possible offer and the potential intermediaries involved will be available in due course. We anticipate any potential intermediaries offer to open in the coming weeks if the IPO proceeds. Once open there will only be a limited time in which to apply. Before making any investment decision you should speak with your own stockbroker or financial advisor.

We believe these developments highlight an exciting future for Funding Circle. Thank you for your continued support and if you have any questions about your experience at Funding Circle, please get in touch.

The Funding Circle team

This advertisement is issued by and is the sole responsibility of Funding Circle Holdings Limited (shortly to be renamed Funding Circle Holdings plc) (“Funding Circle”) and has been approved solely for the purposes of Section 21 of the Financial Services and Markets Act 2000 by Numis Securities Limited (“Numis”), whose registered address is at The London Stock Exchange Building, 10 Paternoster Square, London EC4M 7LT, and who is authorised and regulated by the Financial Conduct Authority. Numis is acting exclusively for Funding Circle and no-one else in relation to or in connection with the possible offer of the shares in Funding Circle and will not be responsible to anyone other than Funding Circle for providing protections afforded to clients of Numis and is not providing, and will not provide, advice in relation to the possible offer or any matter referred to in this advertisement. This advertisement does not constitute an offer or recommendation concerning the shares referred to in this advertisement or advice about purchasing shares in the Company and is not a substitute for independent advice about legal, financial, investment or tax matters.

 

Before purchasing any shares, you should make sure that you fully understand and accept the risks which will be set out in any prospectus which may be published by the Company at the time of any share offer and made available at corporate.fundingcircle.com. If you have any concerns about the suitability of shares in the Company, you should consult an independent financial advisor.
 
This advertisement is not for distribution or publication in any jurisdiction outside the UK, the Channel Islands and the Isle of Man. In particular, this advertisement is not for release, publication or distribution, in whole or in part, directly or indirectly, in or within the United States of America, Australia, Canada, Japan or any other jurisdiction where it would be unlawful to distribute this advertisement.

 

No reliance may be placed for any purpose whatsoever on the information contained in this document or on its accuracy or completeness. Apart from the responsibilities and liabilities, if any, which may be imposed by FSMA or the regulatory regime established thereunder, no liability whatsoever is accepted by Funding Circle, Numis or any of their respective members, directors, officers or employees nor any other person for any loss howsoever arising, directly or indirectly, from any use of such information or opinions otherwise arising in connection therewith.
News

How our collections process works

At Funding Circle our aim is for you to earn stable returns by lending directly to businesses. As with any type of lending, some businesses may run into difficulties after taking their loan and be unable to repay it in full. We call this bad debt. We expect a certain percentage of bad debt to occur each year and account for it in your projected return.

When a business falls behind with their repayments, our Servicing, Collections and Recoveries team will work closely with them to achieve the best possible outcome for investors. To help you understand the steps in more detail, we’ve set out below a guide to how our collections process works.

A repayment becomes late

When a business falls behind in payments we try to contact them straight away. Many are responsive and cooperative (more on this below). However, if we cannot reach them, we have a phased approach to resolve the issue:

Try to retake the direct debit

We typically find out if a direct debit has failed 3 days before the payment date. At this point we automatically send an email to the borrower, and we try to retake the direct debit. We will also phone the borrower to understand why the direct debit failed and to ensure that the relevant account has the required funds.

Send a demand letter

If the second direct debit fails, we phone and email at least twice before issuing a formal demand letter for the payment. After issuing the letter we will continue to phone and email the borrower (and any guarantors).

Charge a late fee

After seven days we will apply an administration fee to their arrears and send another demand letter to both the borrower and the loan guarantors. The letters include documents explaining some of the possible consequences of insolvency.

The purpose of the administration fee is to encourage borrowers to get the loan back up to date, and not to prioritise other creditors over their debt to Funding Circle investors. The fee, if received, goes towards any third party costs that arise from dealing with their case (i.e. tracing agents, court fees, external lawyers, etc).

We continue to contact the borrower and guarantor by phone and email. We also use online tracking technology and other data sources to try to trace the borrower, and may arrange a site visit by a field agent.

Default the loan

Depending on the circumstances, if we have had no contact from the borrower or the guarantors we may then decide to default the loan. We will typically default a loan when it has been late for three months, although we may default at any time if we believe it is in the best interests of investors. When the loan is defaulted we demand full payment of the full outstanding amount from the borrower and the guarantors.  

This also has the effect of crystallising the debt of the guarantors, and enables us to commence formal legal or insolvency action.

Most of our recoveries come through the loan guarantors, usually in one of four ways:

1. Payment plans

We will always seek to agree a fair and affordable payment plan with borrowers and guarantors. We want guarantors to get back on their feet and repay the loan in full over time, and usually we will not agree to an early settlement figure for less than 100% of the principal and owed interest. We always ask for contractual interest to be paid too. If the payments are below a certain threshold, we will require security on the guarantor’s property.

We review payment plans (and the guarantors’ financial position) periodically throughout each year, to ensure that the level of payment plan is fair to both the borrower and to investors. Although repayments may be small to start with, given time payment plans do increase and form a significant part of the recoveries for investors.

2. Individual voluntary arrangements

We do not accept informal settlements, but we will review (and often accept) a guarantor’s proposals for an Individual Voluntary Arrangement (IVA). This may involve some write-down of the debt. Having an IVA in place (rather than an informal arrangement) ensures that an insolvency practitioner, who is an officer of the court, stands behind the agreement and is responsible for making sure the proposal is fair and accurate. An IVA is designed to give people another chance, and we respect the legal purpose behind this procedure.

3. Bankruptcy

Sometimes bankruptcy is the right option for an individual. When a guarantor is made bankrupt, we will always try to get an insolvency practitioner from our panel appointed as Trustee in Bankruptcy (i.e. the person who takes controls of the bankrupt’s assets and carries out various investigations). However, sometimes this is not possible. When an individual enters bankruptcy it is very rare that there will be a material recovery for investors.

4. Court Action

Sometimes court action will result in us appointing High Court Enforcement Officers (i.e. bailiffs) to agree a payment plan with a guarantor, or we seek to obtain a charge on their property and then an Order for Sale. This is very much the last resort for us.

We will normally stop any legal action if the guarantor starts communicating with us again. That said, if we have any reason to believe that a guarantor is deliberately trying to deceive us (rather than simply being afraid to face up to his or her responsibilities), we will always take legal action or commence bankruptcy proceedings rather than try to negotiate or approve an IVA.

Support for credible borrowers

As mentioned above, many borrowers who experience difficulties do communicate with us and want to repay their loan once they get back on track. Where possible we try to find a solution that will allow them to keep going. If they can turn their business around, sell assets or start a new business, not only does it help them, but we can recover far more for investors over the long term.

The borrower is always encouraged to pay all arrears as quickly as possible. However, if they are credible, then by not pushing for an immediate (and unlikely) payment in full we can create trust and loyalty. By supporting  businesses through difficult periods, we aim for full repayment of the principal with all accrued interest for investors.

We have developed this strategy over many years and it has produced strong results. We will continue to refine and improve our process, and work tirelessly to chase every late payment and defaulted loan to get the best outcome for investors.

If you’d like to learn more about bad debt, defaults and how they can impact your return, more information can found in the following articles:

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

Meet the Collections and Recoveries team, who help keep your returns healthy

How returns change over time

Enjoy lending,

The Funding Circle team

Saving for a house – by Jasmine Birtles

Jasmine Birtles is a TV and newspaper journalist and personal finance expert. In her new column she’ll be helping you get the most from your investment and reach your personal goals.  

Whether you’re after a home of your own, or you want to help the kids get on the housing ladder, saving for a house can be a daunting prospect. Fortunately there are various things you can do to get the keys to that first home quicker than you thought.

Add to your savings

To get a mortgage you’ll need a deposit and that’s where people struggle. Stay focused and make some sacrifices and you can get there:

  • If your parents are able to have you, you could move in with them temporarily and put aside money you would have spent on rent and bills.
  • Cut your costs including going out, getting takeaways, spending on clothes and the like.
  • Switch all the bills you pay to get the cheapest monthly rate.
  • Check your old direct debits and cut subscriptions including magazines, gyms and unused apps.

Use every scheme going

There are a few Government schemes around specifically aimed at first-time buyers, so make the most of them.

Help to Buy

Help to Buy Shared Ownership works like the schemes run by Housing Associations. You get the chance to buy a share of your home (between 25% and 75% of the value) and then you pay rent on the remaining share. Later on, you could buy bigger shares or the whole lot once you can afford to.

The Help to Buy Equity Loan is a government scheme that helps buyers get a new build property in England. It’s set to run until 2020 and is available to homeowners looking to move as well as first time buyers, but only for new-build homes that are worth under £600,000. It gives an equity loan of up to 20% of the price of the house you want to buy and it means that you personally only need to put down a 5% deposit to get a good mortgage.

The Help to Buy ISA is a savings scheme where the government will top up your savings by 25% (up to £3,000). Your first payment to your ISA can be up to £1,200 and then you can pay up to £200 each month. When you buy your property, your lawyer will apply for the extra 25%. Happily you don’t have to pay it back.

Find out more about all three here.

Starter Home Scheme

In this scheme, 200,000 new build homes will be made available (soon!) to first-time buyers under 40 years old. At least 20% will be taken off the market price, costing no more than £250,000 outside London and £450,000 in London. There’s more here.

Get your parents to help

You’ll probably have had this conversation already, but if your parents or grandparents can help with the deposit it can be invaluable.

However, if they want to help but don’t have the money, they could still be a guarantor for you. There are several ‘guarantor mortgages’ on the market that allow parents, grandparents, or friends to help you buy a property without actually having to hand over any cash at the start. Ask a mortgage broker which lenders offer these.

Try Shared Ownership

…with a housing association

Shared Ownership is usually run by a housing association or council. You own part of a property and pay a small rent on the other part which is owned by the housing association or council.

Competition is high for a place on a housing association list so get in as soon as you can. You can only be on it if your household income is less than £80,000 per year outside of London or less than £90,000 per year inside London. You can find out more here.

…with a friend

Consider doing your own, private ‘shared ownership’ scheme where you buy with a friend or partner. It’s a bit risky but so long as you know that you can get on with the other person, and you have watertight contracts in place, then it can work.

Make extra cash

Aim to make at least an extra £100 a month with a side-earner. You could be  a film extra, do focus groups or babysitting, make cakes to sell, mend computers and more, depending on your skills and time. See the Make Money section on my website, MoneyMagpie.com for more ideas.

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