Projected Return

The projected return is an estimate of the annual return, after fees and bad debts, that a diversified investor could earn when lending through each of our lending options.

To calculate it we rank-order investors by the return they are expected to earn, after fees and bad debt but before tax. The minimum return that 65% of those investors are expected to earn is then used as the projected return for that lending option. We do this for both the Balanced and Conservative lending options.

The return that each investor is expected to earn is calculated by taking the following for each investor:

Gross interest rate

This is the gross interest rate that businesses pay to investors for the money they borrow over an annual period.

Estimated annualised bad debt rate

This is the percentage of loans that on average will not be paid back in the future, on an annualised basis. It is the percentage of loans that are lost net of the amount that is recovered.

Funding Circle 1% servicing fee

The 1% servicing fee is deducted from monthly loan repayments when, and only when, they are received.

We then use the formula below to calculate the projected return for each individual investor. The formula takes into account loans funded by each investor in the last 60 days, or since they last selected a lending option, whichever is more recent. The formula assumes monthly re-investment of repayments at the same gross interest rate. The average return is weighted by loan amount, compounded and before tax.


Current estimated return function v2

Limitations to this estimate

The projected return of each lending option is a future estimate of the return after fees and bad debts for the distribution of loans, across both risk band and loan term, that we expect to be funded by investors lending through each of our lending options. We think it is the most useful and accurate way to assess future investment performance because it takes into account both our fees and any future bad debts but as with many calculations it has some limitations, including:

  • The calculation is based off estimated bad debt rates and actual bad debt rates may differ. Historical information on actual bad debts can be found on the statistics page.
  • Gross interest rates may change in the future which may impact your return.
  • It compounds interest and therefore assumes re-investment.
  • It is before tax: different investors have different tax rates some earnings are taxed differently. Read more.
  • It does not include any amounts not lent to businesses.
  • Past returns are not necessarily a guide to future returns, and by lending to businesses your capital is at risk.