Updated: Apr 1, 2020
Last week, we outlined some of the actions we have taken to protect your returns on our platform, including tightening our credit risk parameters and strengthening our Collections and Recoveries capabilities.
As this fast-moving situation develops, we will continue to ensure your portfolio is well-positioned to deliver resilient returns. We wanted to highlight two areas where we have introduced measures to support this work:
The ongoing restrictions on daily economic life will not impact all businesses equally within the diversified portfolio of businesses you lend to. However, it is inevitable that some will experience an impact as a result of the Coronavirus and may find it difficult to make their full monthly repayments. While the Government has announced a range of unprecedented and wide-ranging measures to support small businesses, these will take time to get fully up and running. This means that over the next few months you are likely to see an increase in the number of late loans in your account.
We have deployed additional resources to our Collections and Recoveries team who are working closely to support these businesses through this period. Providing flexibility in the short-term—for example through payment plans which allow businesses to reduce or have a temporary break from their repayments—will help many of these businesses to get through the next few months, and allow them to maintain their monthly repayments over the term of the loan. This will minimise avoidable credit losses in the long run, protecting your returns in the process.
Last week, we discussed some of the measures we have taken to protect investor returns. These included strengthening our credit criteria and increasing our pricing on new loans to reflect how the economy may perform. In addition to lending to new businesses, investors also purchase existing loans sold by other investors. It is important that these loans are purchased at prices that reflect current market conditions, so in the future we may need to adjust the Transfer Payment paid from the seller of the loan part to the purchasing investor.
As the Transfer Payment goes to the buyer of the loan—rather than Funding Circle—this will help to ensure investors continue building resilient portfolios that are well-positioned to withstand changes in the economy. We closely monitor both our loanbook and the external environment, and will review the Transfer Payment on an ongoing basis. If we adjust this we will update investors listing their loans for sale at that time. Otherwise, we will keep you updated through the Access Money Tab on your account, where you will be able to see the current Transfer Payment being applied.
The ability of businesses to access finance is more vital than ever, and your lending will form an integral part of this support. If you have any questions, please don’t hesitate to get in touch. Remember, by lending to businesses your capital is at risk, and your investment is not covered by the Financial Services Compensation Scheme.
The Funding Circle Team