Funding Circle Crowdfunding Review 2019
Ratings, Pricing & Comparisons

Is Funding Circle the best Crowdfunding website for you?​

With lower marketing costs and online technology which allows us to globally connect with customers, now is the perfect time to start up a new business.

However, there’s one issue…

Entrepreneurs need to raise investment funds to get started!

Well, don’t worry – there’s good news!

Funding Circle focuses on helping businesses to access different sources of finance while at the same time being able to provide potential investors with excellent returns for their money.

Funding Circle was first launched way back in August 2010 in the UK.  What makes it appealing to investors, is that they are able to select which businesses their money is actually lent to or alternatively can choose to have their money allocated automatically over 100 businesses which are done via the Autobid feature – providing that the £20 minimum investment is met towards any single company – which totals to £2,000.

With so many crowdfunding platforms and alternative sources of funding available on the market, it can be difficult knowing which one to choose…

So, to help you make your mind, I have reviewed what exactly Funding Circle has to offer so you can make up your mind whether it is suitable for your funding needs.

So, if you’re ready, let's dive in and get on with it!!

I will put Funding Circle through our rigorous testing and will look at the following aspects.  

Performance:

How does Funding Circle perform and what features do they offer to help create the perfect crowdfunding campaign?

Usability :

Does Funding Circle offer everything necessary that users expect from an alternative source of funding?  

Support:

Does Funding Circle offer quick customer support solutions and help, and can users count on them when it matters most?

Cost:

Does Funding Circle offer the best pricing in the marketplace? And more importantly, what deals are available that can help users save money?

Performance

4/5

Funding Circle performs exactly as it says it will.  It offers established businesses mid-term installment loans with term lengths between six months to five years.

Cost

4/5

The term lengths that Funding Circle offer are between six months to five years and the interest rate is determined via various factors such as the strength of the business and your creditworthiness.

Usability

4/5

For businesses that have a strong credit history, the easy application process and competitive rates of Funding Circle are definitely worth considering. 

Support

2/5

Funding Circle offers both email and phone support with the added bonus of an account manager being assigned to you over the lifespan of the loan. 

We Like

  • No penalties for pre-payment
  • Competitive fees and terms
  • Superb customer support
  • Very few extra fees
  • Transparent statistics
  • Good track record and growth history
  • Secured property loans

We Don't Like

  • Long application process
  • Generally, most loans are unsecured
  • Stringent requirements for borrowing
  • 1% annual fee of the total balance of the loan
  • Unfavorable interest return rates (as most loans are unsecured)

Introduction

Funding Circle began in the UK in 2010 and is an online lender.  It came about when one of the founders realized how expensive it was to source financing when they started up a gym franchise.   Funding Circle extended their services to the US by merging with the Endurance Lending Network. 

So, what does it do?

Well, Funding Circle offers established businesses medium-term business loans (which are generally referred to as ‘term loans’). The term lengths can be as short as six months or as longs as five years.  The great thing about Funding Circle is besides an origination fee and interest it has very few fees and offers competitive rates. 

Now, the downside is that because Funding Circle focuses on businesses that are established, the qualifications for borrowing are rather stringent.  These include having a credit score of 620 or more and having been established for at least two years.  

Nine times out of ten borrower’s using Funding Circle could no doubt be eligible for a bank loan but are generally looking for a simpler and faster funding route.

By being so stringent, Funding Circle is not an option for small businesses, start-ups or less established ones. 

But the good news is… 

For those that DO meet Funding Circles criteria, it really can be a superb option for lending. 

So, in a nutshell, businesses that are suitable for using Funding Circle are most likely going to secure a better rate from a bank, but for those who don’t relish the prospect of a long and complicated application process or simply don’t have the time, then Funding Circle is definitely worth considering.

#1 Ease of Use

If a funding site is difficult to use or understand, then the chances are that no-one will want to use it.  A good way is by having a look at the startup process, if it’s tough, to begin with then this most definitely is not a good sign. 

So, how did Funding Circle perform? Was it a walk in the park, or more like a walk in the dark?  Let’s dive in and find out…

The Application Process

An online initial application form must be completed in order to even begin applying for a Funding Circle loan.  This determines if your business meets the minimum criteria for funding.  It also runs a quick check of your credit status.

If, pre-approved (remember, you haven’t been approved yet!), you will then receive a quote which outlines an estimate of the interest rates.  A representative from Funding Circle will then be in contact and will run through the loan options that were quoted as well as answer any questions that may have arisen.

The next step will be to provide supplementary information and documentation regarding the business.  This is also the point where Funding Circle will carry out a hard credit check – which of course, can impact your credit score.

Funding Circle state that the following documents will need to be supplied:

  • Most recent 12-month personal tax return
  • Most recent 2-year business tax returns
  • Information regarding business debt
  • Most recent 6 months of bank statements

Once the consultation has taken place and the appropriate documents submitted, the application will proceed to underwriting.  It usually takes only a few days for Funding Circle to send through their offer which also includes the origination fee and rate of interest.  If their offer is accepted, then one can expect to receive funds in a matter of days.  

Funding Circle state that generally, the application process is completed within less than ten days.

Verdict – Funding Circle is straightforward and easy to follow, and once the initial application process has been completed, then funds can be sourced within ten days.

#2 Customer Support

One thing that I consider to be really important when testing and reviewing anything is what support is available and what shape and form it comes in.  After all, we’re all human and need help at some time or another, and I want to know that when (not if!!) I need it, that it isn’t too far away.

In this section, we’ll have a look at exactly what help and support Funding Circle offers. 

Are you ready? Good, well let’s get cracking…

Funding Circe offers both email and telephone support.  What I really like is that during the life of the loan, you are assigned a specialized account manager who is able to answer any questions and also help with understanding the loan itself. 

When I read through the customer reviews, I was pleased to find that Funding Circle borrowers were more than happy with the support that they were receiving. 

Verdict – Funding Circle offers good solid customer support with the added bonus of including a specialized account manager.

#3 Networking tools and features

It’s always a good idea to have a look at what social networking tools a crowdfunding site offers together with what reporting features are offered.  As social networking is a crucial piece of crowdfunding, these features are essential.  Also, does the crowdfunding site have an active community and more importantly one that is suited to your cause? If it hasn’t then you need to really ask yourself, what exactly are you getting from the platform fee?

Well, these are the questions that I would normally be asking in this section.  However, Funding Circle is different and because it is a peer-to-peer lending platform, reviewing the above would be nigh on impossible.

So, for this particular platform, I’m going to look at what investment products Funding Circle offers as well as fund withdrawal, net returns, defaults, security, and borrowing.

Are you ready?  Good, then let’s go…

Investment Products

So, investors can directly open an account via the Funding Circle website and can then deposit funds in and either manually choose the borrowers that they want to invest in or alternatively select ‘funding circle auto-bid.’  It must be remembered that financial advisers are unable to open accounts on their client’s behalf’s and potential investors MUST directly invest.

What about fund withdrawal?  GET STARTED

Over the term of a loan, investors will receive both principal and interest repayments.  If an investor wishes to withdraw the investment without any costs, then they won’t have any option but to wait until all the repayments are completed.  Default settings automatically assume that interest and capital payments are to be re-invested into other loans, so for funds to be withdrawn early an investor needs to sell on their loan part to other investors that are on the secondary market on Funding Circle. The fee that Funding Circle charges for this are 0.25%.

The secondary marketplace is extremely active with investors constantly selling and buying loan parts.  By the sale of loan parts, investors are then able to liquidate any investments into cash and can then withdraw funds. 

Loan parts can be bought and sold by investors at a discounted or premium rate of 3%. 

Net Returns

The only way to get an accurate estimation of net returns is by looking at the years where 100% of loans were completed.  The maximum timescale for a loan term on Funding Circle is 5 years.

The chart below illustrates net return from 2010-2017 with no default estimations. Top of FormBottom of Form

Apart from 2011, Funding Circles net returns have been steadily above 5%. 

Bad Debt Performance and Default

As per the previous chart, the assets have been plotted under management and against bad debt and default rates.

If three consecutive payments have been missed, they will then be considered a default and any recoveries are included under bad debts.

When Funding Circles bad debt rate is compared to its default rate, this then shows how well the recovery process of the company is performing. 

Funding Circle Volumes

Since the company was founded back in 2010, Funding Circle has created in excess of £2 billion worth of loans. Even back in 2016, Funding Circle facilitated £823 million in loans which are the equivalent of 26% of the market share – which made them the largest P2P provider in the UK.

Over the last four years, significant funding has come via institutional investors which include: Marshall Wallace’s investment trust, Funding Circles investment trust ‘Funding Circle SME Income Fund,’ VPC Speciality Lending and P2P Global GI.  As a way of supporting SME businesses, the British Business Bank also lends via Funding Circle. 

Funding Circle loans can be categorized by loan type and geography which the platform then grades from A-E*.

Security

Most of the loans on Funding Circle are unsecured ones, however, sometimes directors of borrowing companies will provide personal guarantees.

Often, when the loan is in relation to lending for a property, then asset security will also be a requirement – but only for certain borrowers.

Borrowers 

All borrowers on Funding Circle are SME businesses and are looking to borrow between £5K – £1m for up to 5 years. Funding Circle began to facilitate loans to property developers back in 2014, which then increased their lending cap to £3m.  

Assessment of borrowers is by using the company Financial Statements and the Experian Delphi Score.  Also considered is the profile of the borrower together with any security that may be offered. Credit scores from non-limited companies are taken via CreditSafe.

The table below shows how the weighted average borrowing rate (net of fees) has risen in 2010 from 7.98% to 9.34%.  Although this isn’t a huge change it does, however, show that Funding Circle is remaining consistent with its core lending principals. 

Likewise, on average loan sized have increased from £29,150 back in 2010, to £73,129 in 2019.  This could be as a result of the introduction of higher value property loans in 2014. 

Verdict – So, the bottom line is that it is obvious to see that Funding Circle is broadening its lending requirements, while at the same time still keeping within its core lending principals.

#4 Platform Fees

Platform fees are when a crowdfunding site takes an amount or percentage of the monies raised for either yourself or your cause, and I guess its sort of paying for the privilege of actually using the platform.  These fees can range from anywhere between 5-12%. 

Be careful though, as some fees can increase if the goal isn’t met, while others, such as Crowdcube offer an ‘all or nothing’ model which means that if the expected goal isn’t reached then no funds are received at all.

So, what does Funding Circle offer and what are their terms and fees?  Well, read on and let’s have a look…

Because Funding Circle offers loans via installments which vary in length from six months to five years, they charge an interest rate.  Now, this is based on the strength of the business, your creditworthiness together with various other factors.

What Funding Circle does, is take into account how long the business has been running, what the real-time cash flow is and of course, what the business type actually is.  The length of the loan can also affect what rate of interest is charged, which Funding Circle outline on their fees and rates page.

If you choose to pay off your loan early, you could save money on the interest costs – because of the loan being paid in installments.  And guess what, another great thing is there are NO, I repeat NO prepayment penalties!!

It’s worth keeping in mind that payment begins on the day that the loan is accepted as opposed to the day the funds were received and are payable on a monthly basis.

Funding Circle actually has a loan calculator which you can use which will give you a rough idea of what monthly payments could be.

Funding Circle doesn’t have very many ‘extra’ fees. Aside from the interest and origination fee, the only other charges could be as a result of late payments or insufficient funds.

To make things easier and for the purpose of this review, illustrated below are Funding Circles fees and terms:

Borrowing amount: $25K – $500K
Term length:
6 months – 5 years
Interest rate:
4.99% – 26.99%
Origination fee:
0.99% – 6.99%
APR:
7.4% – 36%
Collateral:
A personal guarantee, a lien on business assets

Verdict – Funding Circle’s fees work rather differently to those of Crowdfunding platforms, in that they charge interest on the loaned funds which is dependant on the term that it is taken over. It could be possible to secure a better rate from a standard bank; however, the application process will no doubt be much more complicated and much slower.

Is Funding Circle right for you?

Of course, Funding Circle won’t be suitable for everyone, and of course, not everyone will be eligible, so let’s look at exactly who it is suited to…

Budget

Funding Circle could be an option for those on a budge as it does offer lower rates compared with some of the other online lenders.  Of course, it would be difficult to beat the SBA low-interest rates, which are generally mid to high single digits.  However, as a result of Funding Circles terms, it could definitely be considered as a manageable alternative, with APR’s ranging from 10.91% to 35.5%. 

Beginners

Funding Circle is not suitable for recently launched small businesses or start-ups that have fuzzy growth trajectory.  Typically, Funding Circle borrowers need to have been in business for a number of years and have a high annual revenue.  As Sam Hodges, the founder quoted “We only lend to established businesses that have the cash flow needed to support loan repayment and a legitimate plan for growth.”

High-Level

Funding Circle could be suitable for high-level established business, providing they have a good credit history. A minimum annual revenue is not required, but the business must have been trading for no less than two years and have a credit score of 620.

Summary

Well, that’s it I’m now nearing towards the end of this review, and I hope that it has given you an overall idea what Funding Circle is about and what it has to offer.  I’m guessing though that the final and most important question is – Is Funding Circle THE ONE, for you and your business?

The easy application process and competitive interest rates make Funding Circle a definite consideration for established businesses who have a solid credit history.

Although the application process may take longer than other online lenders, it is most definitely easier and quicker than applying for a bank loan.  Now, banks can possibly offer better rates than what Funding Circles do, but quick access to capital should be a consideration and might be worth accepting the trade-off. 

Funding Circles superb customer service coupled with the company’s transparency are all added bonuses.

In terms of loan volume, Funding Circle is swiftly developing into the biggest UK P2P provider.  As a result of the vast number of loans that are being originated, the Funding Circles secondary market liquidity is growing so much so that investors are able to access their funds even earlier: which is a potentially attractive and reassuring prospect for potential investors. By remaining strongly aligned to their core lending towards SME businesses, Funding Circle can continue to develop their loan originating capabilities as well as refining its process of credit assessment. 

The landmark securitization of loans back in 2016 combined with a rise in institutional capital to the platform have firmly established Funding Circle as  a worldwide leader within the P2P industry.  Only time will tell if Funding Circle together with other P2P providers will be able to direct the asset class into the mainstream.

Disclaimer

(The EntrepreneursGateway.com team are committed to produce independent, thoroughly researched and comprehensive guides and reviews for the best products and services that will help you in your business and your life. If you like what we do, you can support us through our chosen links, which earns us a small amount of commission which helps us fund our research and maintenance of the blog to better help you. Learn more about our Review Process.)

Now, over to you...

Now I’d love to hear from you:

Are you still unsure of which crowdfunding website is best for you?

Maybe you’ve tried Fundind Circle before and would like to tell us about it?

Leave any comments below and I will be sure to answer as soon as they come in!

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