We’re improving how lending through Funding Circle works
On 18th September, we will launch a significantly improved and upgraded version of our existing Autobid and Autosell lending tools, and the option to manually choose which businesses to lend to and sell will be withdrawn
This is an important change, so please read on for more information
- How will the new lending experience work?
- Why are we withdrawing manual lending?
- Is there anything you need to do?
Investors will be able to choose one of two new lending options based on their personal preference. Both options will be available as a Funding Circle ISA, which we intend to launch later this tax year.
Balanced: you will automatically lend to the full range of creditworthy businesses (A+ to E), aiming to achieve an attractive, stable return. This will allow you to build a balanced portfolio similar to the makeup of small businesses in the UK today. The projected return is estimated to be 7.5% per year after fees and bad debt.
Conservative: you will focus on lending to businesses that have been assessed as lower risk (A+ and A) but with a lower projected return. The projected return is estimated to be 4.8% per year after fees and bad debt.
Your actual return may be higher or lower, and by lending to businesses your capital is at risk.
As part of the improvements we are making we are also updating the interest rates at which you lend to businesses. The projected return of both lending options have taken these changes into account. You can read more about the new interest rates, which we’ll be introducing on 30th August, here.
We launched Funding Circle in 2010 with the option for investors to either manually choose which businesses to lend to, or use our Autobid tool to build a portfolio based on their lending preferences. While many investors have enjoyed manually choosing loans, there are some drawbacks to it:
- Many investors do not currently benefit from lending to all types of businesses: currently some investors can find it difficult to access D and E loans, which are some of the most popular. We want to ensure investors lending through Funding Circle have an equal chance of accessing all loans, and earn the best possible return.
- It can mean your lending is not spread evenly across lots of businesses: currently many investors who manually choose loans are not fully diversified and are at risk of having a negative lending experience. We want to ensure investors spread their lending across lots of different businesses as this is the best way to earn a stable return.
- It can be confusing for investors: many investors tell us they prefer a simpler, easy-to-use lending experience: 73% of new investors who join Funding Circle choose Autobid, and 80% of Funding Circle investors* say simplicity of lending is important to them.
* Independently surveyed by Cambridge University
These changes will affect new lending and selling from the 18th September. After this date you will only be able to select one lending option at any one time.
If you currently use Autobid – we will automatically transition you over to one of the new lending options based on your current settings. We will email you separately by 25th August to let you know which option we plan to transfer you to. If you don’t want to be transferred over to a lending option, you can pause lending by logging into your Funding Circle account and turning Autobid off.
If you don’t use Autobid - we have made switching over as straightforward as possible. Just log in to your account before 18th September and select one of the options from the pop-up box. If you do not select an option, you will not be able to lend to any more businesses after 18th September until you turn the new lending tool on.
As part of this change we will also be updating our Terms and Conditions. You can view a summary of the main changes here.
Simpler, better, fairer
By making these changes now, investing through Funding Circle will become a simpler and easier way to earn stable and attractive returns on your investment. This improved experience will also deliver:
A better way to match your funds with businesses
Loan parts will now be matched based on your current projected return and the amount of available funds in your account. This means the projected return for your own portfolio should more accurately mirror the overall portfolio return of your preferred lending option. In addition, loans will now fund faster, further reducing the time your money sits in your account earning no interest.
The best chance of earning a stable return
No more than 0.5% (subject to a minimum of £20 per business) of your portfolio will be lent to a single business, helping you to manage risk effectively.
An easier way for investors with larger accounts to sell loan parts
New loan parts will be no larger than £100, even if you lend a higher total amount to a single business. For example, an investor lending £100,000 would lend £500 to each business (0.5% of their portfolio). Each £500 will now be split into £100 parts, making it easier to sell these parts to other investors.
A simpler selling process
Just tell us how much you’d like to withdraw and you can sell a selection of your loan parts directly to other investors. The option to sell individual loan parts and set a premium or discount will be removed.
No more sale fees
From today, we are becoming the first major lending platform to charge no fees for selling your loans.
A proven track record of stable returns
Projected annual return as of 1st July 2017
These returns show the projected performance of Funding Circle loans by the year the loans were taken out. They are after fees and bad debt, but before tax.
Please note, past performance is not a guarantee of future performance.