Funding Circle – An Introduction

Introduction

Funding Circle is a peer-to-peer lending platform, who established its UK operations in 2010, although it operates in 4 countries worldwide. The Funding Circle platform offers finance to a number of areas including property investment, business growth and expansion, working capital loans and commercial property development.

Funding Circle has an advertised average return of 6.5% ROI after bad debts and charges. This platform also operates a secondary market allowing investors to sell loan parts before term if an investor feels they need to exit a particular investment. Secondary loan part sales are subject to buyers being available in the market at the time, so this offers no guarantees of succesful loan part sales when an investor may need them.

The minimum account deposit for Funding Circle is £100 and the minimum loan part value you able to purchase is £20. Loan terms are usually between 6 months and 5 years. The platform charges investors in two areas, a 1% (of the loan part value) annual service charge and a 0.25% transaction charge when selling loan parts on the secondary market.

The summary account page.

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Image shows the Funding Circle account summary page.

This is what the main account summary page looks like for Funding Circle. It’s very straight forward to understand. The top left box shows your totals in percentages –

Gross yield – refers to your average maximum advertised return across all your current invested loan parts.

Annualised Return – this is your actual annual ROI on all current invested loan parts added to your completed investments in the financial year. The figure also subtracts Funding Circle transaction fees and bad debts incurred.

Estimated fully diversified return – this is your estimated return over all current loan part investments, subtracting Funding Circle transaction fees and bad debts.

The bottom left box shows your all time earnings summary –

Earnings – shows your total paid (interest is only paid the end of each month) return over the life time of the account (note: this is a grand total and is not broken down in to tax years, you will need to either work that out yourself when it comes time to pay your taxes, or a separate tax statement is available to account holders). Earnings are broken down in to four categories, interest, loan part sales, loan part purchases and promotions. These can been seen by clicking the ‘blue plus’ button next to ‘earnings’.

Fees – are Funding Circle’s annual service charge incurred. The service charge is set at 1% of the value of the loan part calculated over an annual term. In addition Funding circle also charge a transaction fee of 0.25% of the loan part value when selling loans on the secondary market.

Losses – show any bad debts you may have occurred. Losses are also broken down in to bad debts minus recoveries of the bad debt, this can be seen by clicking the ‘blue plus’ button next to ‘losses’.

Net earnings – is the sum of your earnings minus fees and losses.

The box on the right of the screen shows your funds summary –

Funding Circle total – is you total account balance on the Funding Circle platform. This includes any loan parts you are invested in as well as any balance you currently do not have invested in any loan parts.

Accrued interest – is any interest gained by your investments that has not yet been paid in to your account balance (accrued interest can not be withdrawn from the platform until it is paid at the end of the month).

The pie chart– is made up of 3 components; the blue section shows any funds put to a loan part but not yet accepted by the borrower; the green shows any funds accepted and is actively attributed to loan parts. There is also a grey section showing any funds on the account platform that are ‘idle’ or unassigned, this includes interest paid at the end of each month.

The loan request page.

The table below shows the format of the loan requests page (excluding the loan identity column).

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Image shows the Funding Circle loan request page (excluding the loan identity column).

Risk – Funding Circle breaks down it’s loan risk assessment in to categories as from A+ being the lowest risk and lowest interest rate, through to E being the highest risk and highest interest.

Amount – shows the total value of the loan request.

Term – is the agreed loan term between Funding Circle and borrower show in months. This term is typically between 6 and 60 months.

Rate – shows the top line annal ROI as a percentage offered by the specific loan request, excluding estimated bad debt and applicable charges.

Funded – is the percentage amount the loan has currently been funded to on the platform.

Time Left – shows the amount of time the loan will remain on the market place in its initial offering. This is typically for 7 days.