Funding Circle is the UK’s largest marketplace lender to businesses, where people and organisations directly lend to small and medium sized businesses in the UK, helping support the core of the UK economy.
Funding Circle sources the same information on business borrowers that banks use from credit bureaus, such as Experian and Creditsafe. Borrowers are identity checked and our experienced credit assessment team review all applications before they are posted onto the marketplace.
Funding Circle only allows established and creditworthy businesses with at least two years trading history into the community. Businesses that make it through the assessment process are classified in risk bands from A+ to E, where A+ is lowest risk.
Investors then choose which type of businesses to lend to and spread their money across a number of businesses to spread their risk. Individual investors will typically fund a small proportion of each loan on the partial loans marketplace, called a loan part, whereas larger investors such as financial organisations will fund an entire loan on the whole loans marketplace, called a whole loan.
Funding Circle then manages the monthly repayments from the borrowers back to the investors. Funding Circle also provides account management and reporting tools for investors. If payments are missed Funding Circle will use a debt collection agency to chase borrowers.
Businesses can borrow from lots of different investors or from one larger investor offering them the whole amount. A bid is the amount of money investors want to lend to a business. Bids are successful on a first come, first served basis. Interest rates are set based on a number of factors including the risk band and term of the loan. The risk band is given to the loan during Funding Circle’s credit assessment.
Bank overheads are sidestepped in the process, which can give investors higher returns and borrowers lower rates although the value of your investment can go down as well as up.