Funding Circle

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Funding Circle Limited
Founded United Kingdom (2010)
Area served
Products Financial Services

Funding Circle is a Peer-to-peer lending service which allows savers to lend money directly to small and medium sized businesses.[1] Funding Circle was the first site to use the process of peer-to-peer lending for business funding in the UK,[2] and now operates in both the UK and US markets. As of April 2015, Funding Circle has facilitated over £600 million in loans to small and medium sized firms.[3]


Funding Circle was set up in the UK in August 2010.[1] It was launched at a time when small businesses were struggling to obtain finance from traditional channels.[4] In its first 10 weeks lenders used the platform to lend more than £1 million to small businesses.[1]

It received £2.5 million in funding from Index Ventures in April 2011.[5] In March 2012 Funding Circle closed a series B round of £10 million led by Index Ventures and Union Square Ventures.[6]

A report published by Nesta in April 2013 found widespread preference for online lending over traditional banks among existing Funding Circle users. 77 per cent of businesses that borrow through Funding Circle said they were ‘likely or very likely’ to approach the peer-to-peer lender for a loan first, rather than go to a bank.[7]

By September 2013 Funding Circle had trebled in size and announced it had facilitated over £150 million of loans since it launched.[8] In October 2013, Funding Circle announced that it had raised a $37 million investment. Accel Partners led this round of funding, which brings the company’s total to $58 million. New investor Ribbit Capital contributed, along with existing investors Union Square Ventures and Index Ventures.[9] Additionally, Funding Circle announced it was launching in the US and joined forces with Endurance Lending Network. Endurance now trades under the Funding Circle name.[10] Since launching more than 50,000 people have registered at Funding Circle. Investors now include local councils, universities and the British Government.[11]

Business Model[edit]

Funding Circle provides a platform where investors can browse businesses that Funding Circle has credit assessed and approved for lending.[12] Businesses submit an application which is reviewed by Funding Circle credit assessors. Businesses can borrow between £5k and £1M (£3M for property development) to finance working capital, expansion capital, asset finance and one off business expenses.[13] In the UK, loan lengths start at the 6 month mark and go up to 5 years.

Once approved, loan requests are posted on the Funding Circle marketplace. Here, investors choose which businesses to lend to and, through an auction process, bid the amount of money they wish to lend and the interest rate they want to earn. At the close of the auction, the loan is filled from the lowest rate bids. For the maximum rate needed to fill the loan, the earliest bids get priority.

Loan auctions typically take seven days. After the close of the auction, the business reviews whether to take the loan at the rate offered. If they accept, one repayment each month is collected by Funding Circle who deduct a 1% fee before paying the investors in that loan.[14] Loan requests are typically made up of lots of investors each bidding small amounts on hundreds of different businesses to spread their risk.[15]

Funding Circle also has an Autobid function, where the system automatically places bids according to the criteria investors have set. Investors can choose the minimum rate they wish to offer by risk category, which types of businesses they want to lend to, and the maximum percentage of their portfolio to lend to any one business.[16]

The platform includes a secondary market where parts of existing loans are traded. Sellers can offer parts at a premium or discount. Funding Circle charges a 0.25% fee on sales. The secondary market can be used by Investors to build up their portfolios quickly. Similarly, if investors need to withdraw money they can sell all or part of their investment via the secondary market. Alternatively investors can choose to withdraw their money gradually as they receive their monthly repayments.[14]

Risk and regulation[edit]

If a borrower fails to fully repay the loan then the lender risks losing part of his or her return. To mitigate against this, Funding Circle recommends that users lend to at least 100 businesses equally. This can be done with as little as £2,000 – i.e. lending £20 to 100 businesses.[17]

In the UK any established and creditworthy business currently operating can apply for a loan at Funding Circle, including partnerships, limited companies and sole traders.[18] Businesses must have at least 2 years of filed or formally prepared accounts and have no outstanding County Court Judgements over £250. A minimum turnover of £50,000 is also required.[19]

Funding Circle use many of the same credit checks as the high street banks to ensure only strong, healthy and creditworthy businesses can post a loan request. This includes an Experian check, whilst also splitting businesses into five risk bands (A+, A, B, C, and C-). If a business defaults, Funding Circle will pursue the business owner to recover the remaining part of the loan on behalf of the investors.[2]

In partnership with Zopa and RateSetter, Funding Circle launched a trade body, the P2P Finance Association, with the stated goal of "ensuring high minimum standards of protection" for lenders and borrowers in the industry. The Government has ruled that peer-to-peer lending and borrowing activities will be overseen by the UK’s new market regulator, the Financial Conduct Authority, from April 2014.[20]


Returns for lenders to Funding Circle vary from person to person because lenders choose different businesses and loan rates and because bad debts and charges reduce returns. As of September 2013 Funding Circle advertised an average return of 5.8% after fees and bad debt.[21]


  1. ^ a b c Dan Hyde (18 September 2010). "How savers get 9% rates and easy access". This is Money. Retrieved 2011-03-11. 
  2. ^ a b Patrick Collinson (18 September 2010). "Peer-to-peer lending and saving: Making everyone happy". The Guardian. Retrieved 2011-03-11. 
  3. ^ Funding Circle statistics, retrieved 26 April 2015 
  4. ^ Sharlene Goff and Norma Cohen (30 August 2010). "Bank lending: The manager says no". Financial Times. Retrieved 2011-03-11. 
  5. ^ Richard Tyler (12 April 2011). "Funding Circle expands its small business reach". The Telegraph. Retrieved 2011-03-11. 
  6. ^ "Funding Circle Closes £10 million Series B Round". 2 April 2012. 
  7. ^ James Hurley (13 April 2013). "Peer-to-peer lenders 'could break banks' stranglehold'". The Telegraph. Retrieved 2013-11-04. 
  8. ^ "Funding Circle pass £150million in loans". P2P Money. 23 September 2013. Retrieved 2013-11-04. 
  9. ^ Rebecca Grant (23 October 2013). "UK-based Funding Circle raises $37M to fund American small businesses". Venture Beat. Retrieved 2013-11-04. 
  10. ^ Kylie MacLellan (24 October 2013). "UK peer-to-peer lender Funding Circle expands with U.S. deal". Reuters. Retrieved 2013-11-04. 
  11. ^ Hugo Duncan (14 August 2013). "'Faster, lower cost finance for businesses that are fed up with banks': Funding Circle boss says 'peer-to-peer' lending boom has only just begun". This Is Money. Retrieved 2013-11-04. 
  12. ^ "Barclays criticises small business lending targets". BBC News. 13 August 2010. Retrieved 2011-03-11. 
  13. ^ "Loan Types and Criteria". Funding Circle. Retrieved 2013-11-04. 
  14. ^ a b Paul Prowse. "Earn up to 9% on your savings with Funding Circle". Money Magpie. Retrieved 2013-11-04. 
  15. ^ "The mother of invention". The Economist. 30 September 2010. Retrieved 2011-03-11. 
  16. ^ Amy Andrew (5 April 2013). "Should you ditch the banks and their low savings rates? Why people are flocking to lend-to-save and how it works". This is Money. Retrieved 2013-11-04. 
  17. ^ "The 100 Club". Funding Circle. Retrieved 2013-11-04. 
  18. ^ "What is Funding Circle?". Dumb Funded. Retrieved 2015-03-07. 
  19. ^ "Who can apply for a loan?". Funding Circle. Retrieved 2013-11-04. 
  20. ^ Lucy Tobin (16 April 2013). "On the money: A peerless way to get your money working". The Evening Standard. Retrieved 2011-11-04. 
  21. ^ "Funding Circle". Funding Circle. Retrieved 30 September 2013. 

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