Updated: 29 October 2020
To help investors understand how lending works at Funding Circle, we have always provided information on the teams that work behind the scenes to support our customers. One such team is Collections & Recoveries, who play an integral role in supporting businesses that have fallen behind on their repayments, and work with them to get their loans back on track.
When the lockdown was announced in late March, we experienced an increase in borrowers getting in contact to ask for payment plans. These were typically low risk borrowers that had never missed a payment before, and were very concerned with preserving cash at a time of high uncertainty.
To protect investor returns, we moved quickly to introduce a range of measures to support these businesses through this difficult period. Below we give a bit more detail on the measures we’ve introduced, and how they work in the best interests of borrowers and investors.
Firstly, we recognised that we needed to expand the team in order to deal with the huge increase in contacts. To address this, we worked quickly to reassign and train staff from other teams in the business so we had capacity where it was needed most. The Collections team is now 3 times bigger than it was before covid.
As well as scaling up the team, we also invested in new technology to streamline our processes and make them more efficient. This allowed the team to spend more time supporting businesses, discussing their circumstances on the phone and managing their cases more effectively.
We have always taken the approach that when a business falls behind or is unable to make repayments, we will work with them to get their loan back on track. By helping businesses through difficult periods and providing them with breathing space when they need it, they’re more likely to pay back more of their loan, which in turn helps protect investor returns.
That approach has been more important than ever this year, and we’ve brought in additional measures to help manage this unprecedented situation. Here’s some of the key elements of the process, including new measures that we’ve introduced.
Our Collections team is notified even before a loan has become late. We typically find out if a direct debit has failed 3 days before the payment date. At this point we automatically send an email to the borrower. We will also phone the borrower to understand why the direct debit failed and to ensure that the relevant account has the required funds.
Their case is then managed by teams that specialise in each area of the process, from first contact through to payment plans, clearing arrears and defaults.
For each borrower, we will try to understand their circumstances and explain their options. Depending on their situation, they could benefit from our following offerings:
A coronavirus business loan – Existing customers can apply for funding under either the Bounce Back Loan Scheme (BBLS) or the Coronavirus Business Interruption Loan Scheme (CBILS). These schemes have been specifically designed to support businesses affected by coronavirus and have unique features that can help.
A payment plan – Payment plans are an agreement, usually lasting 3 months, where the borrower pays a reduced amount. In some circumstances, they may get a payment holiday instead.
Additional flexibility – In recognition of the unique challenges faced by businesses this year, where it’s appropriate we can offer more flexibility than our pre-covid processes would have allowed. Measures such as multiple payment plans can help them start making repayments and avoid defaulting.
Although this is always a last resort for us, if a business is unresponsive, uncooperative, or has no prospect of being able to repay the loan, we will default loans if necessary.
At this point the personal guarantee will come into effect, and we will seek to recover the outstanding balance from the business and loan guarantors. This could come as part of a payment plan agreed with the guarantors, an Individual Voluntary Arrangement (IVA). In some cases they may declare bankruptcy, or we may need to pursue the case through court action.
With the current environment constantly evolving, we’ll continue to review the support we provide to businesses facing financial difficulties, and invest in our teams and systems to protect investor returns.