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Accessing your funds through Funding Circle

How Lending Works

Accessing your funds through Funding Circle

Updated: 12 August 2020

When we first launched, Funding Circle opened up small business lending to investors for the first time. Loans taken out since 2012 are on track to deliver annualised returns of 4-7% per year and we are proud that 83,000 investors have earned more than £300 million in interest (after fees and bad debt), more than any other lending platform. We are also pleased that Funding Circle is the best-capitalised lending platform in the UK, following last year’s Initial Public Offering.

When you lend through Funding Circle, your money is matched to loans which are paid back over a period of up to five years. As a result, it is important to treat lending as an investment, as your money may be tied up for this time period.

Even so, investors are able to access funds in two ways:

  1. Switch lending off. Businesses pay back interest and principal each month, so by simply switching lending off, you will receive approximately 3 – 5% of your outstanding portfolio after the first month and approximately 30 – 40% of your money back after the first 12 months.
  2. List loan parts for sale. Our selling tool matches investors looking to sell loan parts with investors looking to buy. However, this is subject to demand from other investors and selling is not guaranteed.

We are constantly looking at ways to improve your lending experience and following a recent review, we will be launching a new selling tool on 2nd December that will improve your ability to access funds more regularly. 

How will the new tool work?

Currently, loan parts are sold on a first-come, first-served basis and investors wait until they reach the top of the queue before selling any. The new tool will cycle through all investors wishing to sell loan parts as many times as possible within a 120 day period. This will mean investors start to receive money back more regularly from the loan parts that have sold.

We will also introduce a transfer payment for those wishing to sell loan parts to other investors. When a loan part is sold, a 1.25% transfer payment will be applied. For example where a seller sells a £20 loan part, they would receive £19.75 from the buyer (as with the current tool, you would also receive any interest owed on that loan part since the last monthly repayment).

This will boost returns for investors that buy both new loan parts and loan parts listed for sale on the secondary market. We hope this will attract new customers and funds to the platform. It also brings us in line with other lending platforms although, in our case, Funding Circle does not receive any fees from any loan part sale. The transfer payment does not apply if you want to withdraw repayments as they come in.

Finally, the new tool will make it easier to change the amount you want to withdraw after you have started selling. You’ll also be able to see the amount received from loan part sales as well as the amount received from repayments, so you don’t withdraw more than you initially requested. 

100% of the transfer payment goes to the investor buying a loan. Funding Circle does not charge a fee for selling or withdrawing. These graphs show how you could receive cumulative repayments and funds from sold loans. They are indicative and meant for illustration purposes only.

What happens next?

On 2nd December, all investors currently selling loans will be automatically transferred over to the new selling tool, and investors will start to sell loans with funds made available more regularly. Every investor will continue to sell for 120 days, and will receive a notification at the end of this period to confirm how much has been sold in that time. If you would like to sell more loan parts, you can make another request and start selling loans again.

For further details on our new selling tool, please read our FAQs.

As part of this change we will also be updating our Terms and Conditions. You can read more about these here.

As part of our review, we have considered a number of options and strongly believe the package of measures we are launching are in the best interests of the majority of investors and will provide an improved overall service.

We appreciate your feedback

Your feedback is really important to us and we continuously review what our customers have to say. We will provide answers to your commonly asked questions in our FAQs page here. Thank you.

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Remember, by lending to businesses your capital is at risk. Past performance is not a guide for future performance. Funding Circle is not covered by the Financial Services Compensation Scheme.

£300 million interest earned is after fees and bad debt, but before tax. The repayment rates with lending paused are based on the average repayment rate for all loans outstanding on the 1st of September 2019. As you are lending to your own individual portfolio of loans, your actual repayment rate may differ.

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