Type Ltd. Key people Samir Desai, CEO | Headquarters London, UK Founded August 2010 | |
Industry Financial technology, Peer-to-peer lending Area served UK, United States, Germany, Netherlands, Spain Products Business loan
Commercial and industrial loan Founders Samir Desai, James Meekings, Andrew Mullinger Parent organization Funding Circle Holdings Ltd. Profiles | ||
Funding circle how it works
Funding Circle is a peer-to-peer lending marketplace that allows investors to lend money directly to small and medium-sized businesses. Funding Circle was the first website to use the process of peer-to-peer lending for business funding in the UK, and now operates in the UK, US, Germany, Spain, and the Netherlands. As of February 2017, Funding Circle has facilitated over £2.5 billion in loans to small and medium-sized firms.
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Funding circle talks p2p lending the small cap alternative financing revolution
History
Funding Circle was launched in the UK in August 2010. It received £2.5 million in funding from Index Ventures in April 2011. In March 2012 Funding Circle closed a series B round of £10 million led by Index Ventures and Union Square Ventures. By September 2013 Funding Circle had tripled in size and announced it had facilitated over £150 million of loans since it launched. 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. Since launching more than 50,000 people have registered at Funding Circle. Investors now include local councils, universities and the British Government.
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. In October 2015 Funding Circle expanded operations to Germany, Spain, and the Netherlands by acquiring Zencap.
Business Model
Funding Circle is an online marketplace that enables investors to offer money direct to small companies. 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. 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.
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. 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. 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. 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.
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. For loans in the UK, the total estimated lifetime bad debt across all risk bands is 3.9% as of April 2016.
Returns
As of April 2016 Funding Circle advertised an all-time average annual return of 7.1% after fees and bad debt for loans originated in the UK.