Funding Circle
Encyclopedia
Funding Circle is an online portal which allows savers to lend
money directly to small businesses. The portal is the first site to use the process of peer-to-peer lending for business funding in the UK. As of 10 October 2011, Funding Circle has facilitated £11.7 million in loans to small firms.
Funding Circle also has an Autobid function, where the system automatically bids on loans on the lender's behalf after the lender specifies a target interest rate.
The website's concept is similar to that of peer-to-peer lending site Zopa
, where people lend their money to individuals.
and RateSetter
, 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 lots of businesses, and employs the same credit checks that banks use on businesses.
Funding Circle also employs the same credit checks that banks use, including credit checking each business through Experian
and splitting businesses into three risk bands (A+, A and B). If a business defaults, Funding Circle will pursue the business owner to recover the remaining part of the loan.
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 association will also lobby the UK Government to regulate the industry itself.
Loan
A loan is a type of debt. Like all debt instruments, a loan entails the redistribution of financial assets over time, between the lender and the borrower....
money directly to small businesses. The portal is the first site to use the process of peer-to-peer lending for business funding in the UK. As of 10 October 2011, Funding Circle has facilitated £11.7 million in loans to small firms.
History
Funding Circle is based in the UK and launched August 2010. It was launched at a time when small businesses were struggling to obtain finance from traditional channels. In its first 10 weeks savers used the platform to invest more than £1 million into small businesses. It received £2.5 million in funding from Index Ventures in April 2011System
The website provides a platform in which lenders can browse businesses that Funding Circle has underwritten and approved for lending. Lenders bid an amount and an interest rate in an auction style to become part of the loan. Every loan request is made up of hundreds of lenders each lending a fraction of the total loan. Each lender lends a small percentage of their total funds to lots of different businesses.Funding Circle also has an Autobid function, where the system automatically bids on loans on the lender's behalf after the lender specifies a target interest rate.
The website's concept is similar to that of peer-to-peer lending site Zopa
Zopa
Zopa is a UK-based company providing an online money exchange service, allowing people who have money to lend it to those who wish to borrow, instead of using savings accounts and loan applications at traditional banks. The process is sometimes referred to as peer-to-peer lending...
, where people lend their money to individuals.
Risk and regulation
As with other lending sites,including ZopaZopa
Zopa is a UK-based company providing an online money exchange service, allowing people who have money to lend it to those who wish to borrow, instead of using savings accounts and loan applications at traditional banks. The process is sometimes referred to as peer-to-peer lending...
and RateSetter
Ratesetter
RateSetter is a British peer to peer lending company, based in Southwark, London. It is the first company to have introduced the concept of a “Provision Fund” into peer to peer lending. It is a founding member of the P2P Finance Association, the first trade association for the peer to peer finance...
, 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 lots of businesses, and employs the same credit checks that banks use on businesses.
Funding Circle also employs the same credit checks that banks use, including credit checking each business through Experian
Experian
Experian plc, formerly known as CCN Systems, is a global credit information group with operations in 36 countries. The company employs 15,500 people with corporate headquarters in Dublin, Ireland and operational headquarters in Nottingham, England and Costa Mesa, California, US...
and splitting businesses into three risk bands (A+, A and B). If a business defaults, Funding Circle will pursue the business owner to recover the remaining part of the loan.
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 association will also lobby the UK Government to regulate the industry itself.