You’re helping this whisky company go even further, one bottle at a time

small business present

Meet David Stirk, a whisky aficionado, author and dedicated business owner. After graduating with an Honors Business Degree, David went on to work in a few different whisky companies, and even wrote a book called ‘The Distilleries of Campbeltown’. However, despite loving the industry he was in, David found himself yearning to take control of the business and make his own choices.

In 2004, the opportunity arose to buy a fantastic cask of whisky, and it gave David the spark to start his own whisky bottling business, The Creative Whisky Company. Based in the beautiful Lowlands of Scotland, his business has gone from bottling 15 casks a year, to doing seven times that amount today. As with any growing business, things can change over the years, however at The Creative Whisky Company, one procedure has remained: every cask they bottle is ‘nosed and tasted’ by David and his business partner.

The whisky industry is a large and competitive market. To invest in more stock and continue growing, David and his team have borrowed more than £390,000 from Funding Circle investors since April 2017. ‘I’d been in an eight month period of waiting for a mortgage to come through on the buildings that we bought. I just thought, it’s time to try another avenue, so that’s when I went to Funding Circle and I was amazed with the speed and the honesty. Everything they said would happen, happened.’ said David.

In this short video, meet David and hear more about his passion for the whisky industry:

Are you interested in lending to businesses like these?
Lend alongside 74,000 investors and support small businesses across the UK by signing up online today. You can use our investor information guide to help you get started and there are thousands of loans which you can be a part of, making it quick and easy to build a diversified portfolio. Remember, by lending to businesses your capital is at risk.

Looking to expand your business?
More than 30,000 businesses in the UK have accessed finance from Funding Circle. You could boost your cash flow, refurbish premises, hire staff and much more. Check if you qualify for a business loan online in just 30 seconds.

A Christmas Carol – Small Business Present

Businesses across the country work hard all year round. To celebrate their devotion and their contribution to the economy, this festive season we’re presenting our very own Christmas Carol. Last week we looked at the history of small businesses, from medieval times to the early 1900s. Today it’s time for small business present, so read on to learn about the impact they have on today’s world and the trends that have helped them along the way.

Big business booms in the 1960s

Before we get to the modern day, it’s useful to look back over the last few decades to understand the changes that led us here. In the 1960s, small businesses were struggling. Television and globalisation were having a huge impact on the world, and big business was booming.

small business present

Piccadilly Circus at night circa 1960 – David Howard

Shoppers wanted to go to big supermarkets and buy the globally recognised brands they saw on TV. Local shops and independent producers struggled to compete, and their market share dropped dramatically. In everything from farms to finance, large corporate players bought out their smaller rivals, and manufacturing jobs were taken abroad for cheaper labour. Coupled with a thriving stock market and a flourishing electronics and information industry, more and more people moved from manual work to office-based roles.

Such was the preference for big business, even the term “small business” saw a decline. Business owners across the western world faced a squeeze, and starting your own enterprise was an increasingly rare thing to do.

small business present

This graph shows the use of “Small business” in English books over time

Entrepreneurs start their comeback

A career-minded office worker in the 1970s planned to become an increasingly important fish in a big corporate pond. However, as the 1980s progressed, entrepreneurs began to break out on their own once more. While some business owners desired independence and others were laid off, collectively there was a cultural shift away from corporate life, and entrepreneurship was a common aspiration once more.

Technology creates new opportunities

The 1990s saw the widespread adoption of home computing and the internet. Not only did this make it easier to run a business from your own home, entrepreneurs could access a global market at the touch of a button. By drastically reducing overheads, it lowered the barriers to entry for newcomers. Established businesses could now also compete on a more even footing.

small business present

Hewlett-Packard HP9000 Unix Workstation – Thomas Schanz

Adapting to a new world order

An advantage small businesses have always had is their adaptability. Without hierarchy and extensive processes, they are more nimble in responding to a changing marketplace. Employees also have more varied roles and skill sets, as they have to carry out multiple business functions with a smaller staff base. As the pace of change continues to accelerate through the digital age, savvy entrepreneurs can seize opportunities quickly. Large corporate firms, on the other hand, can be cumbersome to respond.

Faith in institutions, whether they are government, media, NGOs or corporations, is also at an all time low. The volume of opinion available today means they no longer hold the sway they once did, and scandal after scandal across every industry has destroyed the trust people once had.

Now customers are looking for alternatives. What they crave most is authenticity, and small businesses are ideally placed to step in. Whether they’re an IT provider or an artisan bakery, small businesses tend to be specialists. They have a natural authenticity as experts in their chosen field, allowing them to engage with their audience more genuinely. They can then appeal to a slice of the market that large companies will struggle to reach.

small business present

David from The Creative Whisky Company – a Funding Circle borrower

A golden age for entrepreneurs

These cultural and technological trends have led to an unprecedented boom for small businesses. Today there are 5.7 million businesses in the UK, an increase of 2.2 million since 2000, and up from just 700,000 a few decades ago. 99% of them are small businesses, showing the incredible impact they have on our economy:

  • Small businesses employ 16.1 million, 60% of private sector employment
  • Their combined turnover is £1.9 trillion, 51% of private sector turnover
  • 76% are sole proprietors

A recent survey found that 84% of people who work for themselves are “more satisfied in their working lives”. Less than 5% of owners plan to close their business down and move back to a more traditional job.

Even the political uncertainty of events such as Brexit have not dampened the rise of entrepreneurs. Over 400,000 new businesses have been created in the last two years, with 67% saying that they are expecting to see an increase in turnover during the next 12 months.

Along with the new opportunities in digital marketing and management, new sources of funding are helping small businesses thrive. Online lending and crowdfunding give entrepreneurs better access to the funding they need. This not only helps them get started, but allows them to grow and become more resilient to changing economic times.

Added together, it truly is a golden age for entrepreneurs and small business. Long may it continue.

Check out the rest of our Small Business Christmas Carol

Read our first chapter on the history of small businesses, then complete the journey with Small Business Future, looking at the trends shaping their future.

 

Refining your lending experience

At Funding Circle, our aim is for you to earn attractive, stable returns by lending directly to creditworthy businesses. To help you achieve this, we wanted to let you know about an update we are making to how we set interest rates for businesses. We’re also introducing a small change to how the projected returns displayed for our Balanced and Conservative lending options are calculated.

Providing borrowers with a more tailored experience  

The interest rate paid by businesses currently depends on two factors; the length of their loan and the risk band assigned to them following our robust assessment process. This means businesses are only offered one of six different interest rates depending on their assigned risk band. In order to provide businesses with a more personalised experience, next year we will begin to increase the range of interest rates we set for borrowers within each risk band.

This change will have no impact on the projected returns you can earn through our Balanced and Conservative lending options, or the estimated bad debt rates for each risk band. We will let you know if these projected returns change via the Lending Settings page of your account.

Refining how we display projected returns

Currently, the projected return shown for either the Balanced or Conservative lending options is the median estimated return, after fees and bad debts but before tax, across all investors using that option. As you lend to your own individual portfolio of loans your own personal estimated return (found on your Summary page) may be higher or lower.

The median shows the lowest projected return that 50% of investors can expect to earn by lending through that option. We want more investors to experience a higher personal estimated return than the overall projected return, so we are refining the calculation. It will now show the lowest projected return that 65% of investors can expect to earn by lending through that option.

The two illustrative charts above demonstrate this, by showing the distribution of projected returns for an example group of investors using the Balanced lending option. The green shaded area shows the percentage of investors in the group whose personal estimated return is equal to or higher than the displayed projected return.

Following this update, and taking into account the current mix of risk bands we expect to be funded on the platform, the projected annual returns after fees and bad debt, but before tax for both lending options will be displayed as:

  • Balanced – 7.2%
  • Conservative – 4.8%

It’s important to note that this change has no effect on your personal estimated return, the businesses you lend to or the estimated bad debt rates we expect investors to experience. You can see the full calculation here.

Remember, by lending to businesses your capital is at risk and your actual return may be higher or lower. If you would like to discuss these changes further please get in touch.

Enjoy lending,

The Funding Circle team

ISAs, Brexit, and the 2017 Budget. November industry news

Fintechs take market share from the dominant high-street banks – Financial Times

In the third quarter of this year, net lending (that’s total lending minus repayments) to small businesses through Funding Circle was higher than the entire UK banking system for the first time.* During that time, over 1,700 British businesses were able to access the finance they need to grow and thrive. This is a great demonstration of the positive impact your lending is having on the economy. Together, we’re helping businesses reach their full potential and go even further.

UK peer-to-peer lenders plan to raise millions from ISAs – Financial Times

We’re really pleased to announce that we have started rolling out our Funding Circle ISA product to existing investors. With the Funding Circle ISA, you’ll be able to earn attractive, stable returns tax-free, while supporting the backbone of the UK economy. It also takes just minutes to set up your account. You can find out more about the ISA account, and register your interest if you are not currently lending through Funding Circle, here. More information can also be found in our FAQs, and blog. If you have any questions please get in touch. Remember, by lending to businesses your capital is at risk.

What fax machines and floppy disks reveal about Britain’s productivity problem – The Economist

During the 20th century, productivity growth in the UK increased steadily, but in the past decade, it’s barely budged. Today, many tech companies are trying to change this by using technology, such as machine-learning and AI, which helps to speed up tasks and increase efficiency. By embracing the growing digital economy and saying goodbye to fax machines and floppy disks, businesses have the power to shake off this productivity standstill and encourage faster growth across the country.  

Budget 2017: Business jury give a thumbs up for helping hand for small firms – The Times

It’s clear that our British small businesses have a key role to play in helping to solve the productivity problem as well. If more small businesses are given the right financial support in order to invest in these new technologies, it would help them maximise their output and effectiveness. Additionally, news in the Budget that the Chancellor will bring forward the switch in business rates indexation from the retail prices index to the consumer prices index is welcome. This and the freezing of the VAT threshold at £85,000 for the next two years is a step in the right direction.

Funding Circle borrowers back joining European Free Trade Agreement post-Brexit – P2P Finance News

The Budget also revealed that a further £3 billion is being set aside for Brexit planning. As the negotiations continue, we asked thousands of small business owners for their views. More than half (57%) of business owners in the UK are supportive of joining the European Free Trade Agreement – or the ‘Norway Option’. It’s evident that this route is a priority within the business community and it’s important that we listen to ensure we achieve the best possible outcome for their success. Check out our blog for the full results and read more in the Financial Times.

London’s startups stress out over Brexit—and ping pong – Bloomberg

Ping pong, the national sport of FinTech, brings together tech companies from all across London for a night of excitement, nail biting action and of course, pure glory for the winner. Not only is the event good fun, helping to build strong company morale, it also highlights the importance of access to talent post-Brexit for FinTech firms with many of the competitors coming from all over the world. At Funding Circle, 30% of our teams are non-UK European nationals, so we were pleased the government provided certainty to EU citizens living in the UK last week.

* Data taken from Bank of England ‘Bankstats (Monetary & Financial Statistics)’ – Table A8.1 ‘Monetary financial institutions’ loans to non-financial businesses, by size of business’ under ‘Net loans (exc overdrafts). Bank of England banks account for at least 75% of the lending market.

A Modern Christmas: Festive experiences to enjoy this year

Don’t be a scrooge this Christmas! Local businesses are working harder than Santa Claus and his elves to make sure you make the most of the festive season. From the butchers and the florists, to the bakers and wine merchants, the business owners below know exactly what you need to have jolly and joyful Christmas experiences this year.  

Oh Christmas tree, oh Christmas tree!

No one knows the exact year that the first Christmas tree was brought into someone’s home, but it is estimated to be around 1510 AD – and the tradition carries on today in many countries across the world. Wreaths have also grown in popularity and decorating them can make for a festive and fun activity. Dried oranges, cranberries, ribbon and pinecones are just a handful of the items you can use. Pick yours up from Rocket Gardens, a DIY gardening company in Cornwall, who even supply handmade edible wreaths made from bay leaves, rosemary and chillies! Rocket Gardens were able to scale up their business after borrowing across three loans since July 2016.

Let it snow, let it snow, let it snow…

If you’re keen to get out of England and have a proper adventure this year, then you’re in luck! Incredible ski locations are just a short flight away, in countries such as Austria, Norway and France. Snowflakes falling, picturesque chalets, brightly decorated streets… Whether you’re here for the kids or on a nice getaway with friends, being in the mountains is the perfect festive break. Need the gear? Finches Emporium, a family-run sports store, will have everything you need to make sure you’re prepared for your snowy getaway. To support an advertising campaign, the Finches team borrowed through Funding Circle in May 2014.

Ho! Ho! Ho!

Are you with the little ones this year? Then we suggest going to wander through a magical winter wonderland on your way to visit Santa’s Grotto at Bellflower Garden Centre, based in the heart of Suffolk. His elves have been working hard over the past few weeks getting everything ready to make sure it’s a truly special experience for everyone. In order to renovate some parts of the premises and purchase a new van for deliveries, Bellflower Garden Centre borrowed finance from 218 Funding Circle investors in November 2017.

All I want for Christmas is mulled wine

What better way to relax after a hearty meal than to have a nice warming cup of mulled wine? We’re not talking about the bottled stuff either… the best way to enjoy it is to make your own. All you need is a nice bottle of red, sugar, a cinnamon stick, nutmeg and a fresh orange – easy peasy. For a great selection of wines, check out Talking Wines, based in Cirencester, who source outstanding wines from passionate producers across the world. In order to increase stock, Talking Wines borrowed through Funding Circle in July 2013. Festive tip: make sure to have the Christmas tunes turned up and a cosy fire lit to create a truly joyful atmosphere.

Sugarplums and sweets

Since we’ve already got you in the kitchen, why not whip up some homemade gingerbread men as well? Making these gingery treats is the perfect activity to share with the whole family. They’re easy to make, have minimal ingredients and taste just like Christmas! We all know that a gingerbread man isn’t complete without gumdrop buttons, so before you get started, take a trip to Fanny Adams Sweet Shop in Kingswinford and you’ll find just what you need and more. To help open a new shop and hire more staff, the fantastic sweets shop borrowed through Funding Circle in December last year.

Happiness and all the trimmings

And finally, one of the finest holiday traditions has to be enjoying a delicious dinner in the company of all of your loved ones. Can this meal be complete without turkey? We don’t think so. Allington Farm Shop, a family-run farm shop and café based in Wiltshire, sells locally sourced and free range turkeys that are sure to be a winner with your guests. But don’t forget to prepare some mashed potatoes, seasonal garden veg, bread pudding and cranberry sauce before you dig in! To help expand their butchery, Allington Farm Shop borrowed from 618 investors in May 2014.

Are you interested in lending to businesses like these?
Lend alongside 74,000 investors and support small businesses across the UK by signing up online today. You can use our investor information guide to help you get started and there are thousands of loans which you can be a part of, making it quick and easy to build a diversified portfolio. Remember, by lending to businesses your capital is at risk.

Looking to expand your business?
More than 30,000 businesses in the UK have accessed finance from Funding Circle. You could boost your cash flow, refurbish premises, hire staff and much more. Check if you qualify for a business loan online in just 30 seconds.

A Christmas Carol – Small Business Past

Whatever the season, small businesses work harder on any given day than Mr Claus on Christmas Eve. Santa may take all the glory, but it’s the determined businesses around the country that deserve the real recognition.

To celebrate the work they do, we’re presenting our very own Christmas Carol, looking at small business past, present and future over the next few weeks. First up, we look at the history of small businesses, learning what life was like for entrepreneurs up until the early 20th century.

Before the industrial revolution, all business was small business

In medieval times, businesses were small operations working mostly in local economies. Farmers sold grain to merchants for sale at local markets, while a single blacksmith would serve the needs of the surrounding area. They were typically single-man or family operations, working for themselves without employees.

Small businesses began forming guilds

To meet the pressure of increasing competition, skilled craftsmen banded together to form guilds. The guild marked a sign of quality, and would often be associated with a particular town or city. They also acted as early unions, scheduling ‘no-work feast days’.

The rise of big business

During the industrial revolution, new technologies such as steam power allowed large factories to greatly increase production. Due to economies of scale the lone blacksmith could no longer compete, and big business grew to dominate. Coupled with international shipping, electric motors and gasoline, the landscape quickly changed forever.

It was only with this rise of ‘big business’ that the term ‘small business’ became common, as it was needed to compare the two. The below graph shows the use of the term ‘small business’ in English books.

Use of “small business” in English books

small business past

Small businesses adapt to changing times

While wealthy industrialists were riding high, smaller entrepreneurs also took advantage of new opportunities from a rapidly expanding economy. The manufacturing boom and imports from around the empire meant a wealth of new products on offer, providing new opportunities for shopkeepers and merchants. This increase in trade and industry then required servicing by transport, banks, clerks and insurers.

small business past

A Victorian business card

Towns and cities also grew rapidly as people flooded there for work. Infrastructure was needed to support this expansion, creating work in everything from building houses to selling milk. The growth meant more schools, doctors, lawyers, shops, pubs and much more. If you were a savvy entrepreneur, there was a small business waiting for you.

However, while the economy grew, it was still a very precarious place for a small business owner. Income was modest and access to credit was limited, leaving them vulnerable to competition and difficult periods of trade. Reputation and contacts were still a major factor in business arrangements, and working class businessmen trying to elevate themselves to the middle class were more susceptible to hard times.

small business past

Street sellers thrive

Known as costermongers, street sellers had a particular set of reliable wares that they sold from a barrow or donkey-cart. It could be anything from oysters and hot eels to crumpets, candles, books or live birds. There was an estimated 30,000 costermongers in London during the late 1800s, and most middle and working class households depended on them.

A street-seller locksmith

Victorian shops

Early Victorians didn’t put prices on their goods. Not only did this allow for haggling, but meant they could set a higher price for customers who looked more affluent.

Goods were also kept in drawers, cupboards or cases and could only be touched by the shopkeeper. In a shoe shop for example, you would only be able to see closed boxes. Rather than browse, you would describe what you needed shoes for and the clerk would select some for you try on.

As time went by, more shop owners began trying to make extra sales with displays of goods on counters with the prices noted. Window displays then followed, with shops installing plate glass fronts to attract customers as they walked by. Stores got larger, and “shop walkers” were employed that were half security guard and half shop assistant.

small business past

A Victorian shop front

Shops were unique, with different suppliers and product ranges. To prevent men walking into an embarrassing situation, women’s clothes were kept on the 2nd floor. Some sold counterfeit goods, while others marked products as “smuggled and stolen” to make them more desirable. As a result, shoppers would go back to vendors they trusted, and manufacturers began prepackaging goods to ensure quality and weight.

Services to the home in 1900

It was commonplace for small businesses to bring their goods or services to customers’ homes. Bakers delivered daily, while milk was delivered and measured out at the door, often twice a day. You’d then make payment for the week on Saturdays.

Others goods such as coal were delivered too. After ordering at the coal yard, your selected grade of coke for the boiler and coal for the fire was brought and deposited in a bunker outside. You would address tradesmen by the product they carried – “Coalman, Milkman, Dustman” and so on.

Insurance was also collected door-to-door. Life insurance was most popular as it was a terrible stigma not to be able to afford a funeral. A company agent would collect each month and log the payment in his book. They’d try to upsell them to contents insurance, or house insurance if they owned their home.

Check out the rest of our Christmas Carol

Continue the journey with Small Business Present – a look at their place in the modern world and the trends that led them there. And finally, in Small Business Future we look at tech and cultural trends that will shape business life in the years to come.

 

How to have a terrifically traditional Christmas

Whether it’s December or June, small businesses are working harder than Santa’s elves all year round. To celebrate their achievements, we’re presenting our very own Christmas Carol, looking at the past, present and future of small businesses.

We kicked off with a Small Business Past, looking at the life of an entrepreneur up to the early 1900s. In today’s piece, we’ve got four fantastic Funding Circle borrowers to help you have a traditional Christmas, so you can celebrate like it’s 1900. They’ve all been able to take their business forward thanks to your lending.

traditional christmas

Sit by a roaring fire

Nothing is more cosy at Christmas time then nestling up by a roaring fire. If you want to give your front room the traditional touch, Aberdeen Fireplace Ltd can help you out. You can find traditional coal or wood burning stoves, as well as grates, ash pans and other accessories. You can also get a gas or electric number if you’d like a more modern feel. To upgrade their premises, they borrowed £27,000 in May 2014.

Get a goose for the family

Victorian families would traditionally have goose or roast beef on Christmas Day. Affluent households then began having turkey, which developed into the staple we enjoy today. Whether you’re entertaining a big group or there’s only a few of you this Christmas, The Wild Meat Company in Suffolk have an excellent range of products for you to serve from local farms. The meat specialist borrowed over £40,000 in September to finance a new labelling and scanning system to package their products. Just make sure you order before Sunday 10 December 2017!

traditional christmas

Eat by candlelight

Without electric lighting, families depended on candles to light their homes. Why not give your table a more atmospheric touch this year with a selection of candles from Northumbrian Candleworks. They have a range of candles and scents to suit any tastes, although probably best to stick to the house lights for cooking! Northumbrian Candleworks borrowed £5,300 in July 2017.

traditional christmas

Indulge in a proper Christmas pudding

Although there is some debate, recipes for the Christmas pudding go back to the 17th century. Enjoyed by royals and working folk alike, its popularity led it to become a symbol of unity across the British Empire. To get your perfect pud, head to Georgie Porgie’s Puddings, an award-winning pudding shop in Devon. From sponges to seasonal specials, everything is handmade with local ingredients. Georgie Porgie borrowed £46,350 in May 2017 to expand their premises and improve business year round.

Are you interested in lending to businesses like these?

Lend alongside 74,000 investors and support small businesses across the UK by signing up online today. You can use our investor information guide to help you get started and there are thousands of loans which you can be a part of, making it quick and easy to build a diversified portfolio. Remember, by lending to businesses your capital is at risk.

Looking to expand your business?

More than 30,000 UK businesses have accessed finance through Funding Circle, helping with cash flow, refurbishment, hiring staff and much more. You can check if you qualify for a business loan online in just 30 seconds.

Your December Review – Insight and Analysis

Your December Review

Your lending has reached £3 billion in the UK! November was also a record month, with £129 million lent to small businesses in the UK.

While it’s fantastic to keep growing, the important story is the impact we can have on the economy. That’s why we’re very excited to say that in Q3 this year, for the first time more net lending (total lending minus repayments) was done through Funding Circle to small businesses in the UK than the UK’s major high-street banks combined*. Thanks to your support, we can continue to have a positive impact on the economy, helping thousands of businesses expand and achieve their ambitions.

November Lending Figures

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

November Block

November highlights: launching the Made to do More campaign

At Funding Circle we celebrate the big thinkers and those who decide to get up to tackle something new. Over half of Brits (56%) think they have the skills to run their own business, but only 13% believe they’re entrepreneurial. If everyone believed they were Made to do More, we could boost the economy and ignite even more opportunities. Head to our blog to find out more about our most recent campaign.

MonthlyTrends

These graphs show the most recent activity on our platform.

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

 

Volume

Totalling over £650 million lent

Value

November 2017 sector breakdown

Amount lent to each sector

Sector

November 2017 regional breakdown

Amount lent to each UK region

Region

LoansDefaulted

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

Each week, we publish a list of the loans being defaulted on the Customer support section of our website under ‘Announcements.’ To see a breakdown of the loans defaulted last week simply click on loans defaulted 30th November 2017.  For further information on why Funding Circle defaults loans you can read our FAQ here.

Collections

HowItWorks

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

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

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

Enjoy lending, the Funding Circle team

*Bank of England data

**Data from CEBR report

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

Read between the lines: Counting the cost of Christmas

We regularly bring you a column from Simon Read, a personal finance expert with extensive experience in helping people make the most of their money. In his last piece, Simon looked at the potential impact of rising interest rates on your personal finances.

Isn’t it great that Christmas is upon us? Season’s greetings to you all – but a warning too.

Yuletide is an expensive time: and if you don’t plan your spending, you could wake up in the New Year with a costly hangover.

Don’t get me wrong, I enjoy the time of goodwill and excess. But when you’re spending more than usual, you should take a more than usual interest in your spending. Frankly it comes right back to budgeting basics. If you plan your spending, then there’ll be no ghastly financial surprises. Experts at Deloitte reckon the average UK shopper will blow £542 this Christmas. That’ll be £283 on presents, £140 on food and drink, £63 on socialising and £56 on travel.

How does that compare to your plans? I know travel could be a lot more expensive, for instance, for those who have to visit family on the other side of the country! But, if you want to splash out at Christmas and can afford to then my advice is go for it. One of the basic tenets of good money management is ensuring you give yourself some fun money.

Without it life can turn into a series of fairly dull financial challenges where you’re always looking to maximize returns on your cash or ensure it’s working hard for your future happiness. But your happiness now is equally important so enjoy the chance to spend a little of your hard-earned and spread a little joy!

However here’s a serious warning: if you’re leaning on a credit card to cover the cost of Christmas, keep a close eye on it to ensure you can clear the debt in January. Nearly two in five families will pay for Christmas on plastic this year, reckons the charity National Debtline.

That’s fine if you’re doing so for convenience and will pay it off next month. But it’s dangerous if anyone puts stuff on a card because they can’t afford to pay it now. That creates worry and potential debt problems.

If you ever find yourself in that position take a step back and ask yourself if you really need to borrow to pay for whatever it is or if you can do without it. The bottom line is that Christmas is the season of goodwill, and people won’t complain if you don’t deliver an outrageously-expensive gift because you may have had to tighten the belt a little more this year.

With that in mind the New Year is a great time to make some positive resolutions. If you haven’t formulated some spending and saving plans for 2018 then make a list, check it twice, and plan to introduce some sensible money habits in January. You can start by running the rule over all your savings. If you have a nest-egg languishing in a building society or bank account then have a look at how much interest it’s paying. I can guarantee it will be relatively paltry.

Make one of your New Year’s resolutions to get more from your savings. You already know you can getter better returns with peer-to-peer lending. Now with the new Funding Circle ISA in the process of being rolled out to current investors, these returns can now be earned tax-free. For a balanced portfolio and looking over the longer term you could also look at opportunities in stock markets. Although with more potential Brexit turmoil ahead, that’s something to consider very carefully.

The key is to start the year on the right foot with a positive approach to your savings. Do so and you’ll end the year better off, and with more money to help pay for the Christmas excess of 2018!

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.

How to have Christmas in Lapland in 2022

Christmas is all about tradition. From turkey and cracker jokes to arguing over who gets to be the boot in monopoly, every family has their own. While we all love our favourites, what if one year you did something different? Treat the family to a Christmas they’ll never forget.

Make regular contributions to your Funding Circle account and you could be going to Lapland to meet Santa and Rudolph in their own back yard.

Christmas

According to the Bank of England, a typical household spends over £500 extra in December, so even modest savings can make a difference. With a little planning you won’t need to get anywhere near your credit card. Contribute regularly for a longer period, and you could have the Christmas of a lifetime in a few years.

In just 5 years you could have:

Christmas in a country house

Fancy hosting your own Downton Christmas special? Put away £20 a month and you could have £4,312.57 – enough to rent a country house for your extended family. You could even hire caterers so you can sit back and relax.

Christmas in Lapland

Put aside £100 a month and you could have £10,077.80. That’s enough to treat the whole family with a trip to Lapland! Meet Father Christmas and ride a reindeer-led sleigh under the starlit sky. It will be a Christmas they’ll never forget.

Christmas in Australia

Want to swap your hat and scarves for flip-flops and swimming shorts? Transfer £200 a month and you could have £17,284.33, enough to take the family for a dream Christmas holiday in Australia. Have a beach BBQ on Christmas day, soak up the sunshine, and maybe even watch a winter Ashes series (from behind the sofa).

These figures are estimates based on lending an initial £2,000 deposit through the Balanced lending option, and regular transfers for 60 months. Please note, forecasts are not a reliable indicator of future performance and your capital is at risk.  

By keeping lending active on your account over several years, you’ll see the increasing benefit of compound returns as your repayments are continually lent out again. If you add in a little extra each month it accelerates this process even more, helping to maximise your earning potential. To get started, follow these 3 simple steps to set up your standing order today.

We hope you have found this useful, and if you have any questions about your account please get in touch.

Enjoy lending,

The Funding Circle team

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

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

The Funding Circle ISA is on its way!

We’re excited to announce that from Thursday 30th November we will start rolling out the ISA account to all current investors. This means soon you will be able to earn attractive, stable returns tax-free.

How will the ISA account work?

The Funding Circle ISA will work just like your existing Funding Circle account, while also providing you with:

  • A boost to your earning power – the interest you earn with an ISA is tax-free. As an example, if a higher rate taxpayer lends £20,000 through the Funding Circle ISA and earns a one-year return of 7.5* after fees and bad debt, their post-tax earnings after one year could increase from £900 to £1,500.
  • Flexibility the ISA account is a flexi-ISA. This means you can withdraw any available funds without affecting your annual £20,000 ISA subscription limit, providing you transfer them back in by the end of the tax year.

     

  • A simple investment experiencecreating an ISA account takes just a few minutes, and can be opened from your existing Funding Circle account using the same login details. Once opened, choose one of our two lending options and start lending.

     

  • An easy way to build a well-diversified portfoliowe recommend lending £2,000 or more, so you can spread your funds across at least 100 businesses for a more stable return. If you would like to start with less, we are introducing an initial minimum card transfer of £1,000 when opening an ISA account or a new Classic account.   

     

  • No fees to access your money – as with your existing Funding Circle account there are no fees for selling your loans

     

As part of this process we’re also renaming existing Funding Circle accounts as the Classic account. Remember, by lending to businesses your capital is at risk, while tax rules and relief can change depending on your personal circumstances.

Providing every investor with the best possible lending experience

Based on the conversations we have had with investors, we expect the ISA to be popular. To manage this interest in the fairest way, and to ensure there are enough lending opportunities on the platform for all investors to continue earning attractive, stable returns, we will be opening up the ISA Account to all current investors (those who created an account before 23rd November) in the following order:

  • Investors who are actively lending (have lent to a business since 1st May 2017)
  • Investors not actively lending but who have previously transferred in funds
  • Investors who have not previously transferred in funds
  • New investors and those who have opened a Classic account after 23rd November 2017

We will open the ISA to each group of investors in the order their account was created. We will keep you updated on our progress over the next few months.

We’ll email you when your ISA is ready to be opened

Once you’ve received your email confirming you can now open your ISA, you’ll be able to login to your account through our website and create an ISA account in a few easy steps, subject to eligibility criteria:

To help manage demand, initially you won’t be able to transfer any existing ISA subscriptions you hold to your ISA account. You will be able to transfer your Funding Circle ISA to another ISA provider, although it’s important to remember that loan parts that can’t be sold won’t be transferred and will no longer be eligible for tax-free interest.

Once all current investors have had an opportunity to create an account, we will launch the ISA to new investors. Following this, we will start to rollout the ability for you to transfer in existing ISA subscriptions.

Although you can manage both an ISA account and a Classic account using the same login, it’s important to remember they are separate accounts that will lend to a separate portfolio of loans.

Transferring loan parts from your Classic account to your ISA account

Due to regulatory restrictions, you are unable to transfer loan parts directly from your Classic account to your ISA account. However you can sell your loans quickly and easily to other investors, providing they aren’t late or experiencing any credit issues, before withdrawing your funds to a UK bank account and then transferring them to your ISA.

We’re pleased to be able to provide you for the first time with attractive, stable returns tax-free. You can find out more about the ISA account, and register your interest if you are not currently lending through Funding Circle, here. More information can also be found in our FAQs. If you have any questions please get in touch.

Enjoy lending,

The Funding Circle team

*The projected return is an estimate of the annual return, after fees and bad debts, that a diversified investor could earn by lending through the Balanced lending option as of 23rd November, 2017. You can see how the return is calculated here. Your actual return may be higher or lower, and by lending to businesses your capital is at risk.

November’s Lending Impact and Borrower Stories

.NovemberInvestorImpact

In this month’s Lending Impact, watch our latest case study video of The Strings Club, check out the article most read by our business community, and find out how you can prepare for The Ashes with five Funding Circle borrowers.

ThisMonthsTopArticle

Do you work harder than Mark Zuckerberg?

Consider yourself a hard worker? Find out how your working week stacks up against the likes of teachers, pilots, professional footballers, small business owners and corporate CEOs in our blog.

NovemberSuccessStory
StringsClub

In our latest case study video, meet Amy, Director of The Strings Club. In 2012, Amy set up the business with one simple mission: to educate and inspire children through music. Watch the video to find out how your lending has helped Amy grow and develop her business, which is now an award-winning musical education group for children aged 4-11. 

Watch The Ashes like a true Lady or Gentleman

With the start of one of sport’s greatest rivalries this Thursday, we’ve put together a list of five businesses that will help you celebrate The Ashes in a true English manner. All of these businesses were able to expand and develop thanks to your lending. Dive in here.

October’s Lending Impact and Borrower Stories

In case you missed it, here’s last month’s post, where we met Tom & Sian, the Founders of Bobbin Bikes, and listed our top five essentials to prepare for Bonfire Night.

Up next

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

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

Enjoy lending, the Funding Circle team

Are you Made to do More?

made to do more

Small business owners have a restless spirit. They have the courage to stand up and go their own way and say “I can do this”. We’re here to help them go further, and we want to support everyone who has that vision. Over half of Brits (56%) think they have the skills to run their own business, but only 13% believe they’re entrepreneurial. If everyone really believed they were Made to do More, we could boost the economy and ignite even more opportunities.

Time to believe

We want to celebrate the big thinkers and the tenacious workers, the people who get up and decide to tackle something new, to give them the belief to take that leap and go their own way.

By realising your own unique attributes and perspective you’ll find the seeds for your future success. If you don’t see yourself as an entrepreneur, you’re in good company, as only 26% of business owners consider themselves entrepreneurial. You don’t need a vision for an empire, just a spark, an idea, and the belief to see it through.

Life would be boring if we all saw things the same. See how your perspective shapes your potential.

From determination and hard graft to passion and creativity, everyone has unique personality traits which give them the potential to succeed. Do you know what yours are?

Our personality test on Facebook can tell you where your talents lie. It’ll help you decide if you’re more of a Business Creative than a Planner, and understand how you can use your attributes to thrive as a business owner.

Head to our Facebook page to take the test

What do you see?

Look at these images and tell us what you see.

 

Now have a look again – do you see something different? What about your friends, family, colleagues? You’ll be surprised what they say.

 

made to do more

 

Do you see a skull first? If so, you’re a Business Creative. You have an exceptional ability to adapt and react to any business situation. You’re intrinsically motivated to succeed within the workplace and will be at the forefront of how a company develops. Your ideas are ready to take you to the next step.

Or do you see a light bulb? If so, you’re a Big Picture Thinker. You’re reliable and always have a plan in place to get the job done. You solve complex problems by using your instincts to work towards your end goals, and don’t necessarily worry about all the details. No business can truly succeed without this type of thinking.

made to do more

 

Do you see cloth? If so, you’re a Big Picture Thinker. You’re reliable and always have a plan in place to get the job done. You solve complex problems by using your instincts to work towards your end goals, and don’t necessarily worry about all the details. No business can truly succeed without this type of thinking.

Or maybe you see a dog? If so, you’re a ‘Go To’ Person. As everyone’s best friend you’re able to get your colleagues to achieve heights they thought they never could. You’re emotionally intelligent and energetic, so naturally fall into a leadership role.

made to do more

 

Do you see a crocodile? That indicates you’re a Business Creative. You have an exceptional ability to adapt and react to any business situation. You’re intrinsically motivated to succeed within the workplace and will be at the forefront of how a company develops. Your ideas are ready to take you to the next step.

Or do you see an island? If so, that might mean you’re a ‘Go To’ Person. As everyone’s best friend you’re able to get your colleagues to achieve heights they thought they never could. You’re emotionally intelligent and energetic, so naturally fall into a leadership role.

made to do more

 

Does a lynx jump out at you first? If so, you’re likely to be a Big Picture Thinker. You’re reliable and always have a plan in place to get the job done. You solve complex problems by using your instincts to work towards your end goals, and don’t necessarily worry about all the details. No business can truly succeed without this type of thinking.

Or does a bird stand out more? If so, you’re a ‘Go To’ Person. As everyone’s best friend you’re able to get your colleagues to achieve heights they thought they never could. You’re emotionally intelligent and energetic, so naturally fall into a leadership role.

made to do more

 

Do you see a mother? If so, you’re a Big Picture Thinker. You’re reliable and always have a plan in place to get the job done. You solve complex problems by using your instincts to work towards your end goals, and don’t necessarily worry about all the details. No business can truly succeed without this type of thinking.

Or do you see a baby? If so, you’re a ‘Go To’ Person. As everyone’s best friend you’re able to get your colleagues to achieve heights they thought they never could. You’re emotionally intelligent and energetic, so naturally fall into a leadership role.

Looking to expand your business?

More than 30,000 businesses in the UK have accessed finance through Funding Circle. You could boost your cash flow, refurbish premises, hire staff and much more. Check if you qualify for a business loan in just 30 seconds.

Want to lend to businesses across the UK?

Make a return and a difference by supporting small businesses. It’s quick and easy to open your account and build a diversified portfolio. Lend alongside 73,000 investors and support the UK economy by signing up online today. Remember, by lending to businesses your capital is at risk.

Watch The Ashes like a true Lady or Gentleman

Swap your turkey for a duck, your snowman for a nightwatchman, and make sure you’ve got your sledging boots ready to go – it’s time for The Ashes. With the start of one of sport’s greatest rivalries this Thursday, we’ve put together a list of businesses to help you celebrate in a true English manner. Each one has been able to grow or develop thanks to your lending.

Sticky pudding not a sticky wicket

Reaching the tea interval can be crucial for a batsman, and it’s an exciting moment for spectators too. We’d recommend upping your tea time credentials with something suitably scrumptious from Country Puddings in Cumbria. Lynne Mallinson, who borrowed £30,000 in 2012, started out baking from her farmhouse kitchen. Lynne has now gone on to win countless Taste Awards. As they say, the proof is in the pudding…

BritishTea

Bubbles on the boundary

If you find yourself on the boundary or even just at home chatting cricket with friends, celebrate like a true lady or gent with a glass of bubbly from Love Champagne. Established in 2007, the champagne specialists sell types for all occasions from their base in Shropshire. To expand their product range, Love Champagne have borrowed over £150,000 since 2016.

Strawberries as crisp as a new ball

A delight all year round, the great British strawberry will bring a touch of summer to your winter ashes. A traditional staple for any Englishman, they’ll help ease the pain of that inevitable top-order collapse. Stock up on your supplies from Annie’s Fruit Shop, who’ve borrowed over £240,000 across 4 loans since 2015, to create a truly delicious dish. Eton mess anyone?

BritishBulldog

Get yourself a hat-trick

Top off your cricket attire with a traditional hat from Laird Hatters, perfect for the pavilion or the stands. Whether you’re looking for a fedora or a flat cap, you’ll find something to suit your style. With rich colours and top quality British cloth, you’ll not only feel great, but you’ll most definitely stand out. To expand their range of handmade hats, Laird Hatters have borrowed £140,000 across 2 loans since 2013.

Become the next Joe Root

If all the cricket commotion has you feeling inspired, why not buy your own cricket gear from The Cornish Cricket Company? A step up from the sticks of rhubarb they practice with in Yorkshire, they sell a variety of gear and even offer coaching. To expand their business and hire more staff, The Cornish Cricket Company borrowed over £50,000 in 2017.

Are you interested in lending to businesses like these?

Lend alongside 73,000 investors and support small businesses across the UK by signing up online today. You can use our investor information guide to help you get started and there are thousands of loans which you can be a part of, making it quick and easy to build a diversified portfolio. Remember, by lending to businesses your capital is at risk.

Looking to expand your business?

More than 30,000 businesses in the UK have accessed finance from Funding Circle. You could boost your cash flow, refurbish premises, hire staff and much more. Check if you qualify for a business loan online in just 30 seconds.

You’re helping to inspire children through music

TheStringsClub

Meet Amy, a musician, teacher and entrepreneur. Amy graduated with a degree in music from Birmingham University. She then went on to become a violinist and violin teacher in London, and was shortly looking for new ways to bring music into the lives of those around her.

With a strong belief in the positive power of music, Amy decided to set up a camp for children aged 4-11 in the school holidays. In 2012, the very first Strings Club was launched just behind Camden market. With six budding string players eager to learn, the session was an instant hit. At the end of the course a parent asked “When’s the next one?” and the business snowballed from there.

Five years on, Amy now runs 6 Strings Clubs across the country, with plans to open in Bristol and Cheshire in 2018. Due to the ever growing popularity of these courses, Amy borrowed from Funding Circle in January 2017 to keep up with demand and expand her business into new areas. “The loans allowed me to expand my business, hire new staff, buy more equipment and launch a marketing campaign. Overall, the experience was very efficient and very helpful” says Amy.

In this short video, meet Amy and hear more about her passion for music and teaching.

Want to lend to businesses like The Strings Club?

Lend alongside 73,000 investors and support small businesses across the UK by signing up online today. You can use our investor information guide to help you get started and there are thousands of loans which you can be a part of, making it quick and easy to build a diversified portfolio. Remember, by lending to businesses your capital is at risk.

Looking to expand your business?

More than 30,000 businesses in the UK have accessed finance from Funding Circle. You could boost your cash flow, refurbish premises, hire staff and much more. Check if you qualify for a business loan online in just 30 seconds.

Autumn Internationals: around the world with Funding Circle borrowers

Rugby fans of the world unite. It’s a long time since a school boy with “a fine disregard for the rules of football” picked up the ball and ran, and the global game is as exciting as ever. Now the Autumn Internationals are in full swing (low, sweet chariot….) we’ve made a list of 4 Funding Circle borrowers to celebrate the coming together of rugby playing nations from around the world. Thanks to investors like you these businesses have been able to grow and prosper.

Eat authentic Argentinian in London

Established in 2007, Buenos Aires has 5 steakhouses in London and the South East which represent Argentina with ‘passion and pride.’ The restaurant serves traditional Argentine cuisine, including meat straight from Las Pampas cooked on an authentic barbecue. They borrowed £80,000 back in 2014 to open a new site in Richmond. Everything you need to be fighting fit to watch a Pumas game!

Sushi

Taste the Orient in Newcastle

Save the airfare and sample hundreds of Japanese dishes at St Sushi in Newcastle City Centre. Dishes range from soup noodles to bento boxes and everything in between. The toon’s favourite sushi spot opened in 2006, and recently borrowed £106,000 to refurbish. Healthy and delicious, it’s tastier than a Japanese World Cup run.

Indulge in an Italian in Windsor

The Quagliozzi family  have been serving fresh and delicious dishes from their native Naples since 2009. They now have 4 restaurants for you to choose from including Viva L’Italia and the Italian Steakhouse. Book a table and talk tactics with your nearest and dearest while enjoying some superb spaghetti. More than 800 investors, like you, have helped the family business open a new Italian supermarket too!

wine

Stock up on South African Sauvignon Blanc

According to the Cambridge Wine Merchants, who borrowed over £200,000 to expand, white wines from South Africa are fast overtaking reds in terms of international respect. Stock up on wines to watch the Springboks this Autumn from one of their 7 shops in Cambridgeshire or buy online. Started in 1993, they’ve won ‘Merchant of the Year’ at the International Wine Challenge (the world’s biggest wine competition) and three times been voted the UK’s No. 1 Independent Drinks Retailer. If you’re South African, maybe get an extra bottle to help forget the defeat to Ireland.

Are you interested in lending to businesses like these?

Lend alongside 72,000 investors and support small businesses across the UK by signing up online today. You can use our investor information guide to help you get started and there are thousands of loans which you can be a part of, making it quick and easy to build a diversified portfolio. Remember, by lending to businesses your capital is at risk.

Looking to expand your business?

More than 29,000 UK businesses have accessed finance through Funding Circle, helping with cash flow, refurbishment, hiring staff and much more. You can check if you qualify for a business loan online in just 30 seconds.

Digging into the data: Stress testing the businesses you lend to

At Funding Circle, our aim is to build a sustainable platform that allows you to earn attractive, stable returns by lending directly to creditworthy businesses. To help achieve this, we rigorously prepare so you can have confidence in your portfolio remaining resilient during every stage of the economic cycle. Part of these preparations include regular stress-tests of the businesses you lend to, and we wanted to share the results of our most recent test with you.

What is a stress test?

Stress tests allow organisations to estimate how their assets are likely to perform during adverse economic periods. These tests form an integral part of any prudent risk management strategy, as they allow us to simulate what could happen to your returns during tough economic conditions, such as a recession. A recession is characterised by a sustained period ‒ typically two consecutive quarters ‒ of negative GDP growth.

What did we do?

We have built on previous tests carried out on the Funding Circle loanbook, in both 2014 and 2016, to make this year’s test the most sophisticated yet. Using more than 25 years of UK insolvency and macroeconomic data, alongside 7 years of small business lending data, our experienced credit risk management team have created a bespoke stress testing model. By applying the same scenario used to stress test the UK’s leading banks to this model, we can estimate how a major recession might impact the returns earned by Funding Circle investors.

Methodology

The starting point for any stress test is to create a number of example portfolios and establish how we expect those loans to perform if the UK economy remained stable. We call this our base scenario. It’s also important to note that we aren’t stress testing any individual loans, instead looking at how overall portfolios would react under stressed conditions. We created two example portfolios:

  • Portfolio A – representing an existing investor, comprising all outstanding small business loans in the Funding Circle loanbook (as of June 2017).
  • Portfolio B – representing a new investor, comprising all small business loans made on the Funding Circle platform in the first six months of 2017.

In our base scenario we would expect Portfolio A to earn an annual return of 6.7%, and Portfolio B to earn 6.8%, after fees and bad debt but before tax.

We then simulated the effects of a recession to these two portfolios. This simulation is called a stress scenario, and it shows what could happen to returns if the UK were to enter a period of severe recession.

This year we haven’t included secured property loans within our example portfolios. This is because these loans make up an increasingly diminishing proportion of the Funding Circle loanbook (less than 10% as of June 2017). More information on how secured property loans could perform in a downturn can be found in last year’s blog.

Building the Funding Circle stress testing model

It’s important that our model accurately reflects how changing economic conditions impact the returns earned by Funding Circle investors. To do this we established a mix of key economic indicators, including inflation, unemployment and interest rates. Carefully combining the right mix and weighting of indicators allows us to estimate how small businesses react to changing conditions.

The chart below shows how closely the overall UK small business insolvency level (the number of businesses who are unable to repay their debts) tracks the insolvency level estimated by our model. This is especially true when looking at the last two major UK recessions, in 1990 and 2008.

Source: Office of National Statistics

This high degree of correlation gives us confidence that changes to our mix of economic indicators closely estimate how small businesses in the UK would react during a stressed scenario. As the Funding Circle loanbook is well-diversified across regions and sectors, and broadly reflects the overall make-up of small businesses in the UK today, we can expect that businesses you lend to will react similarly.

It’s worth noting that businesses that have been trading for at least two years, like the ones you lend to, experienced a lower than average insolvency level during the 2007/08 recession. Businesses borrowing through Funding Circle are on average 10 years old. In addition, approximately half of the businesses in the Funding Circle loanbook successfully traded through that recession, further highlighting their resilience.

Timing of a recession

It’s also important to consider the timing and duration of any stressed scenario when measuring its impact on small businesses. Defaults are not spread evenly over the life of a portfolio of loans, typically starting approximately four to six months after the loans are made, and decreasing again as the outstanding amount to repay falls. In addition, all of our small business loans amortise. This means borrowers pay back a proportion of their principal along with interest each month. The timing and duration of a recession, along with amortisation, reduces the impact of a recession on older portfolios of loans. You can see this from the illustrative graph below, showing what happens to the base default rate when you apply a recession to a portfolio of loans after 18 months:

You can see that the earlier a recession starts, the more significant impact it has on a portfolio of loans.

PRA scenario and results

We tested our example portfolios against the Prudential Regulation Authority’s (PRA) 2017 stress test scenario. This is the same test currently being undertaken by all major UK banks. The PRA scenario provides a range of macroeconomic changes designed to simulate a severe UK recession. By applying these changes to our stress testing model, we can estimate how our example portfolios would be impacted.

The chart above shows that the PRA scenario (in orange) simulates a recession more severe than experienced by small businesses in 2007/08. This recession would start immediately (June 2017), and last for 60 months. During the stressed period our model estimates that the default rate for small businesses would increase by 1.9x. In addition we have also assumed that the recovery rate on defaulted loans would reduce by 40%. The table below* shows how our two example portfolios would be impacted.

Even during this severe recession both our example portfolios remain resilient, although Portfolio B is affected slightly more due to the timing factors discussed previously.

Looking in more detail at how the returns experienced by Portfolio B change throughout the stressed period, even at the point where defaults are at their highest the projected return remains above 3.5% per year after fees and bad debt, but before tax.

When simulating a recession similar to 2007/08, the projected annual returns for our example portfolios after fees and bad debt but before tax are 5.3% for Portfolio A, and 4.9% for Portfolio B.

Validating our results

We wanted to ensure our stress testing model stands up to scrutiny, so you can have confidence that we’ve approached our work in the right way. To help us do this, we asked a leading financial consulting firm, True North Partners, to conduct an independent review of our stress testing and return forecasting models. They have confirmed that the methodology used was valid, and the results based on this methodology are an accurate representation of how your returns could be affected by an economic downturn.

Actively monitoring the economic climate

The results of our test assume that in a stressed scenario, Funding Circle would take no action to mitigate losses. However, we have a number of processes in place to help anticipate and react to worsening economic conditions. In addition to closely monitoring the performance of the loanbook, we also track external macroeconomic conditions to help us identify when a downturn may be approaching. If there were signs that conditions were worsening, we would adjust our credit assessment process to price in some of its effects of on new loans. You can read more on how we assess businesses on our blog.

Conclusion

We hope you’ve found this information useful. We’re committed to helping you earn an attractive, stable return that remains resilient even during the toughest times. You can read more about the performance of Funding Circle loans on our statistics page. If you have any questions please don’t hesitate to get in touch.

Enjoy lending,

The Funding Circle team

* GDP = Gross Domestic Product

CPI =  Consumer Price Index

BOE = Bank of England

** You can see how projected returns are calculated here.

  

 

Earning for your retirement. October industry news

Peer to peer: Can you really get returns of 10%? – Moneywise

In a world of stagnant interest rates, peer-to-peer or direct lending platforms are offering people the opportunity to lend directly to borrowers so they can benefit from more of the return. By using a platform as a middleman, investors can enjoy more attractive returns, and businesses typically benefit from lower rates. In this piece, Moneywise interviewed a handful of investors to discuss their experiences across various platforms. Funding Circle investor Alison said, “…even if bad debts increased I still think I’d be earning more than going somewhere on the high street. I feel very comfortable with the risk I’m taking.” As you know, when you lend your capital it at risk.

6 steps you can take in your 20s to help you retire before 60 – Forbes

Retirement might not be on your mind just yet, but it’s never too early to start planning to ensure that you’re in the best financial position possible when the time comes. There are many different ways to start preparing yourself – big and small – depending on what you want to achieve, such as keeping better track of your spending or investing your spare cash. Simon Read, a personal finance expert, took an in-depth look into the topic and outlined some tips and tricks to take into consideration. Have a read on our blog.

How to start a business for next to nothing: Seven steps to getting your idea off the ground – Daily Mail

We all know that getting your business off the ground can be difficult, which is why the satisfaction and reward you feel once it begins to grow is that much sweeter. From managing growing pains and finding the right office space, to knowing when it’s the right time to take out a loan, every business owner is bound to face some hurdles along the way. In this article, learn how to tackle these challenges head-on and get back to doing what you do best: running your thriving business.  

This £4 billion problem stunting small business growth – City AM

When an exciting opportunity presents itself that has the potential to take your business to its next stage of growth, being able to get the right financial support is crucial. Every year, tens of thousands of small businesses struggle to access finance from the banks, according to figures from the British Business Bank. The rise of alternative funding sources, such as direct lending platforms, have given business owners much more choice and control over their development. With access to fast, fair and personalised finance that takes just days, more and more businesses are able to go even further.

London’s most influential entrepreneurs 2017 – Evening Standard

And finally, we’re pleased to see our co-founder Samir listed as one of London’s most influential entrepreneurs in 2017, alongside many other bright and motivated individuals. It remains evident that despite the backdrop of uncertainty caused by Brexit, London continues to be an attractive place to start and grow a business. In a recent case study, we spoke to Tom and Sian, founders of Bobbin Bikes, to learn about how their London-based bicycle business is on the road to success.

News

Your November Review – Insight and Analysis

YourNovemberReview

Last month was a global record month here at Funding Circle. In the UK alone, over £120 million was lent to businesses thanks to your continued support. We’re also pleased to announce that we’ve been recognised in the LinkedIn Top Companies list for 2017. Read more here or dive into your monthly analysis below.

Each month we bring you a regular column from Simon Read, a personal finance expert with extensive experience in helping people make the most of their money. In this month’s article Simon discusses the recent rise in interest rates and how this will affect your finances.

OctoberLendingFigures

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

InfographicBlock

 

October highlights: meet two entrepreneurs

Our co-founder and UK Managing Director, James Meekings, met the founder of Sustainable Direction, the first business to borrow through Funding Circle. Watch the video to hear two entrepreneurs discuss the highlights and challenges of running your own business.

MonthlyTrends

These graphs show the most recent activity on our platform.

You’ve helped more than 8,900 small businesses access finance in the last 6 months…

Volume

Totalling over £630 million lent

Value

October 2017 sector breakdown

Amount lent to each sector

Sector

October 2017 regional breakdown

Amount lent to each UK region

LoansDefaultedLastWeek

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

Each week, we publish a list of the loans being defaulted on the Customer support section of our website under ‘Announcements.’ To see a breakdown of the loans defaulted last week simply click on loans defaulted 2nd November 2017.  For further information on why Funding Circle defaults loans you can read our FAQ here.

Collections

HowItWorks

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

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

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

Enjoy lending, the Funding Circle team

*Data from CEBR report

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

Read between the lines: How can rising interest rates affect your finances?

We regularly bring you a column from Simon Read, a personal finance expert with extensive experience in helping people make the most of their money. In his last piece, Simon provided some pointers on planning for retirement.

The much-anticipated interest rate rise finally hit at the beginning of November. It was interesting for two main reasons.

First is the fact that it was the first rise in the Base Rate for 10 years. Do you recall what it climbed to then, back in July 2007? The base rate actually went up 0.25% to 5.75%. That seems incredible now, when we’ve experienced almost a decade of record low interest rates.

In fact it’s only been for 18 months that the rate has been at its all-time record low of 0.25%. This month’s rate increase saw it climbing back to 0.5%, where most savers and borrowers have experienced it since the Bank of England lowered it to that level to March 2009.

But the second interesting thing about the rate rise is what it tells you about your money. If you haven’t already got the message that it should be a wake-up call for you to check your finances, then now is the time to get your house in order.

It’s extremely likely that the rate increase is just the first of many over the next 12 months or so. The Bank of England will need to act again to protect Sterling ahead of Brexit and to counter rising inflation. So you should be acting to protect your interests, with interest being at the forefront of your mind.

Think about your savings. While a rise should mean better interest offered at banks and building societies, rates are still likely to remain paltry on deposit accounts. That means thinking carefully about where to stash your nest egg and making the most of alternative options such as peer-to-peer lending or, if you’re prepared for greater risk, stock market-linked investments.

What about your mortgage? If you’ve got a fixed rate loan then you won’t notice the effect of any interest rate rise until the end of your deal. But with further increases ahead, by the time you arrange a new deal, charges may be much higher.

For that reason it’s worth looking at switching sooner.

However you need to check if there are any early repayment penalties on your existing deal and do your sums carefully to ensure that switching will actually be worthwhile in the long-term, especially after taking into account any new charges you may incur.

If you have a variable rate mortgage or tracker then you will be hit by the rate rise much sooner.

By how much? The Nationwide building society reckons a 0.25% rate rise would increase monthly payments by £15 to £665 for the average variable mortgage, or an extra £180 a year. Depending on the size of your mortgage, the rate increase could cost you much more.

However much it is, it’s worth checking out fixed mortgage deals to work out if it’s worth changing. If you have a low variable rate, then you should probably stick with that for the moment. If you’re paying 3% or more, however, then you would be better off finding a lower fixed rate.

And in the months ahead keep an eye on rates.

Some lenders priced in the rate rise to their mortgage rates some weeks ahead. If you see a trend for fixed rates to start to rise, that may be the time to act, before the best low deals disappear altogether.

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