“From our initial enquiry, we found the people at Funding Circle incredibly helpful and the overall process was very straightforward. You can follow your loan's progress online and by keeping the auction process open after your loan is fully funded, we reduced the overall interest rate to one that was even better than we originally expected. We are recommending this financing option to other small businesses due to the ease of process and the competitve interest rates!” Consulting company, London and the South East
Established SMEs can often find it a struggle to access small business loans particularly within the last few years. In addition to this, some of these companies are also facing an increase in charges or even the calling in of any existing small business loans or overdrafts. Small businesses are the backbone of our economy, accounting for around 60% of private sector jobs. Research shows that small businesses grow faster than big companies, which means that SMEs are creating more employment opportunities in the UK. To fully recover from the financial crisis small business loans must become more accessible to creditworthy companies. For many small businesses cashflow continues to be regarded as being one of the most important factors.
Despite the government’s efforts, banks are still very cautious when it comes to lending to small businesses. Even when some companies are able to receive loans, they are finding the fees and interest rates unfeasible. Banks are being criticized for their lack of transparency when it comes to fees for small business loans.
A Funding Circle loan is ideal if your small business would like to raise finance without losing equity in the company. Funding Circle is an online marketplace where businesses can borrower directly from real people; sidestepping the banks and therefore lowering the total cost of finance. The loans are unsecured loans for a 1 or 3 year period, but you can pay it back early at no extra cost. The whole application is completed online and takes just half an hour.
Get a low cost loan approved in days.
The net return is a percentage, calculated to show the return investors* have earned through Funding Circle after fees and bad debt, but before tax, over an annualised period.
To calculate it we take the following:
We take the sum of the cashflows for every day the investor has been lending (ie, from day 1 right through to the current day).
This will reflect the outstanding amount lent to businesses, less any bad debts you have incurred during the period
This is the amount of interest you have earned up until the current day but has not yet been paid to you
The above inputs are taken over a given time period so we can calculate the return for each investor, whereby:
We create an annualised return figure ( r ) by calculating this over a 365 day period.
We then use this formula to calculate the net return:
This net return expression is just one way to show the returns investors have made through Funding Circle. We think it is the most useful and accurate way to measure investment performance because it takes into account both our fees and any bad debts but as with many calculations it has some limitations, including:
There are other methods for evaluating historical or potential investment return that you could choose to use instead and you may want to consider these methods as well.
This estimated net return shows you the expected rate after fees and bad debt, but before tax. This calculation takes your bid rate and deducts the 1% annual investor fee and estimated bad debts for this risk band (based on a fully diversified portfolio lending to all businesses within that risk band).
Annualised, estimated bad debts by risk band are:
These estimate are provided a guide only. Actual bad debts vary for each investor. You may incur more or less bad debts than estimated and in lending to businesses, there is the risk that the value of your investment could go down as well as up. Net returns are shown before tax, to read more about tax treatment click here.