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Whole or fractional loans are purchased by individual and institutional investors from their respective countries. However, only accredited individuals and institutional investors are allowed to participate on the US marketplace.<ref name="Funding Circle FAQ">{{cite news | url = https://www.fundingcircle.com/us/invest/faq/#general | title = Frequently Asked Questions | work = Funding Circle | accessdate=2016-04-28 }}</ref> In addition, loans are purchased by the Funding Circle SME Fund, an investment trust created in November 2015 that trades on the London Stock Exchange.<ref>{{cite news | url = http://www.ft.com/intl/cms/s/0/3333a8dc-968c-11e5-95c7-d47aa298f769.html | title = Funding Circle launches first P2P investment trust | work = Financial Times | date = 30 November 2015 | accessdate=2016-04-28 }}</ref> Funding Circle allows accredited investors in the US to invest using a tax-advantaged [[Individual Retirement Account]] and they are planning to allow UK investors to use an Innovative Finance [[Individual Savings Account]].<ref>{{cite news | url = https://www.fundingcircle.com/blog/2016/02/funding-circle-isa-survey-results/ | title = Funding Circle ISA Survey Results | work = Funding Circle | accessdate=2016-04-28 }}</ref> Investors make money from the interest charged on purchased loans while Funding Circle makes money by charging borrowers an origination fee on each funded loan and by charging investors an annual servicing fee on the unpaid principal balance of outstanding loans.<ref <ref name="Funding Circle FAQ" />
Whole or fractional loans are purchased by individual and institutional investors from their respective countries. However, only accredited individuals and institutional investors are allowed to participate on the US marketplace.<ref name="Funding Circle FAQ">{{cite news | url = https://www.fundingcircle.com/us/invest/faq/#general | title = Frequently Asked Questions | work = Funding Circle | accessdate=2016-04-28 }}</ref> In addition, loans are purchased by the Funding Circle SME Fund, an investment trust created in November 2015 that trades on the London Stock Exchange.<ref>{{cite news | url = http://www.ft.com/intl/cms/s/0/3333a8dc-968c-11e5-95c7-d47aa298f769.html | title = Funding Circle launches first P2P investment trust | work = Financial Times | date = 30 November 2015 | accessdate=2016-04-28 }}</ref> Funding Circle allows accredited investors in the US to invest using a tax-advantaged [[Individual Retirement Account]] and they are planning to allow UK investors to use an Innovative Finance [[Individual Savings Account]].<ref>{{cite news | url = https://www.fundingcircle.com/blog/2016/02/funding-circle-isa-survey-results/ | title = Funding Circle ISA Survey Results | work = Funding Circle | accessdate=2016-04-28 }}</ref> Investors make money from the interest charged on purchased loans while Funding Circle makes money by charging borrowers an origination fee on each funded loan and by charging investors an annual servicing fee on the unpaid principal balance of outstanding loans.<ref <ref name="Funding Circle FAQ" />


Within the UK, until September 2017, Funding Circle permitted lenders to either use an autobidding feature, or to manually choose who to lend money to. In September 2017, Funding Circle withdrew the manual choice functionality at short notice. Lenders are no longer able to choose which loans to fund or which loans to sell. This means that the platform is much more simple as FC no longer need to publish any loan details or allow lenders to interact with borrowers, and there is no need to publish borrowers accounts, credit ratings etc. This could make it more attractive to borrowers. This also means the process is opaque - there is no assurance about how FC allocate lenders to borrowers or carry out credit checks etc.
Within the UK, until September 2017, Funding Circle permitted lenders to either use an autobidding feature, or to manually choose who to lend money to. In September 2017, Funding Circle withdrew the manual choice functionality.<ref>http://uk.businessinsider.com/funding-circle-simplifies-its-investment-protocol-2017-8</ref>


===Risks===
===Risks===

Revision as of 11:18, 30 March 2018

Funding Circle Limited
Company typeLtd.
IndustryFinancial technology, Peer-to-peer lending
FoundedAugust 2010
FounderSamir Desai
James Meekings
Andrew Mullinger
HeadquartersQueen Victoria Street, London, EC4
Area served
UK, United States, Germany, Netherlands, Spain
Key people
Samir Desai, CEO
ProductsBusiness loan
Commercial and industrial loan
Websitewww.fundingcircle.com

Funding Circle is a peer-to-peer lending marketplace that allows investors to lend money directly to small and medium-sized businesses.[1] Funding Circle was the first website to use the process of peer-to-peer lending for business funding in the UK,[2] and now operates in the UK, US, Germany, Spain, and the Netherlands. As of May 2017, Funding Circle has facilitated over £2.2 billion in loans to small and medium-sized firms.[3]

History

Funding Circle was launched in the UK in August 2010.[1] It received £2.5 million in funding from Index Ventures in April 2011.[4] In March 2012 Funding Circle closed a series B round of £10 million led by Index Ventures and Union Square Ventures.[5] By September 2013 Funding Circle had tripled in size and announced it had facilitated over £150 million of loans since it launched.[6] In October 2013 Funding Circle announced that it had raised a $37 million investment and would merge with Endurance Lending Network to serve the US market. Accel Partners led the round of funding along with Ribbit Capital, Union Square Ventures and Index Ventures bringing the company’s total funding to $58 million.[7][8] Since launching more than 50,000 people have registered at Funding Circle. Investors now include local councils, universities and the British Government.[9]

In April 2015 Funding Circle raised $150M in new venture funding led by DST Global, a fund managed by BlackRock, Sands Capital Ventures and Temasek Holdings. Valuing the company at over $1B, the round brought the total amount raised to $272M to date.[10] In October 2015 Funding Circle expanded operations to Germany, Spain, and the Netherlands by acquiring Zencap.[11]

Business Model

Funding Circle is an online marketplace that enables investors to offer money direct to small companies.[12] Businesses can borrow up to £1M (£3M for property development) in the UK, up to $500K in the US, and up to €250K in Germany, Spain and the Netherlands for up to 60 months.[13][14] Initially the loan rate was set through an auction process, but since September 2015, Funding Circle determines the loan rate offered based on risk category and loan term.[15]

Whole or fractional loans are purchased by individual and institutional investors from their respective countries. However, only accredited individuals and institutional investors are allowed to participate on the US marketplace.[16] In addition, loans are purchased by the Funding Circle SME Fund, an investment trust created in November 2015 that trades on the London Stock Exchange.[17] Funding Circle allows accredited investors in the US to invest using a tax-advantaged Individual Retirement Account and they are planning to allow UK investors to use an Innovative Finance Individual Savings Account.[18] Investors make money from the interest charged on purchased loans while Funding Circle makes money by charging borrowers an origination fee on each funded loan and by charging investors an annual servicing fee on the unpaid principal balance of outstanding loans.[16]

Within the UK, until September 2017, Funding Circle permitted lenders to either use an autobidding feature, or to manually choose who to lend money to. In September 2017, Funding Circle withdrew the manual choice functionality.[19]

Risks

Unlike a savings account, investments with Funding Circle are not guaranteed and may lose money if the underlying loan goes into default. Funding Circle assesses the credit of every business and those that qualify are given a risk band to guide investors on their relative strength.[20] For loans in the UK, the total estimated lifetime bad debt across all risk bands is 3.9% as of April 2016.[21]

Returns

As of May 2017 Funding Circle advertised an average annual return of 6.5% after fees and bad debt for loans originated in the UK.[21]

References

  1. ^ a b Dan Hyde (18 September 2010). "How savers get 9% rates and easy access". This is Money. Retrieved 2011-03-11.
  2. ^ 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 7 May 2017
  4. ^ Richard Tyler (12 April 2011). "Funding Circle expands its small business reach". The Telegraph. Retrieved 2011-03-11.
  5. ^ "Funding Circle Closes £10 million Series B Round". Startups.co.uk. 2 April 2012.
  6. ^ "Funding Circle pass £150million in loans". P2P Money. 23 September 2013. Retrieved 2013-11-04.
  7. ^ Rebecca Grant (23 October 2013). "UK-based Funding Circle raises $37M to fund American small businesses". Venture Beat. Retrieved 2013-11-04.
  8. ^ Kylie MacLellan (24 October 2013). "UK peer-to-peer lender Funding Circle expands with U.S. deal". Reuters. Retrieved 2013-11-04.
  9. ^ 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.
  10. ^ Ingrid Lunden (22 April 2015). "P2P Lending Site Funding Circle Raises $150M Led By DST At A $1B+ Valuation". Tech Crunch. Retrieved 2016-04-27.
  11. ^ JD Alois (20 October 2015). "Funding Circle Goes Global with Acquisition of Zencap". Crowdfund Insider. Retrieved 2016-04-27.
  12. ^ "Barclays criticises small business lending targets". BBC News. 13 August 2010. Retrieved 2011-03-11.
  13. ^ "Loan Types and Criteria". Funding Circle. Retrieved 2016-04-28.
  14. ^ "Small Business Loans". Funding Circle. Retrieved 2016-04-28.
  15. ^ Jaime Toplin (9 September 2015). "Why Funding Circle is shifting its lending model". Business Insider. Retrieved 2016-04-28.
  16. ^ a b "Frequently Asked Questions". Funding Circle. Retrieved 2016-04-28.
  17. ^ "Funding Circle launches first P2P investment trust". Financial Times. 30 November 2015. Retrieved 2016-04-28.
  18. ^ "Funding Circle ISA Survey Results". Funding Circle. Retrieved 2016-04-28.
  19. ^ http://uk.businessinsider.com/funding-circle-simplifies-its-investment-protocol-2017-8
  20. ^ "Funding Circle Investor Guide". AltFi. 4 September 2015. Retrieved 2016-04-28.
  21. ^ a b "Marketplace Performance". Funding Circle. Retrieved 2016-04-28.
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