Funding Circle has emerged as one of the largest FinTech Unicorn companies in the world. The company was valued at US$ 1 billion in 2015 but has seen it’s value erode since then. It is the peer to peer lending platform of choice for small businesses in the United Kingdom. Since it began operations the p2p lending firm has channeled close to US$ 2.5 billion to more than 20,000 business based across Europe and the United States. The platform has also been able to attract close to 50,000 investors from the United Kingdom who lend their money on the platform.
Once you apply for a loan on the marketplace you can get funding from individuals and organizations who are enrolled. The platform allows companies to access funds much faster than traditional bank lending models which take time. The interest rates charged on loans at funding circle are much cheaper that those offered by competing banks. The investors on the other hand benefit from the higher interest rates they get compared to 0.5% given by UK Banks.
Funding Circle Review
The company is founded by Samir Desai, Andrew Mullinger, Alwx Tonelli and James Meekings. It has raised close to US$ 273 million in funding from investors such as BlackRock, DST Global and Temasek Holdings. Funding Circle is headquartered in London and has close to 600 employees.
The minimum amount you can lend on their website is £20. The lending term varies from six months to up to five years. The website offers the provision to withdraw from a loan at a fee of 0.25 % provided there are other investors willing to buy. Investors are believed to earn close to 6.5% on average. These earnings are reported after accounting for fees and bad loans but before taxes.
For borrowers the minimum amount you can borrow is £5,000 and this goes up to £1,000,000 for large companies. You can repay loans earlier without any penalty fees.
Limitations Of Borrowing At Lending Circle
- Funding Circle is only for companies with a track record of being profitable. If you are a new start-up it is highly unlikely you will be able to borrow funds over there. It has been analysed that businesses who have been in operation for at least ten years are the ones who qualify for a loan. Having an annual revenue of at least US$ 2 million is another factor that can get you a loan much easily.
- The website still takes about 10 days to approve a single loan. This might be faster than a bank but is still much slower than other online lenders.
- You still need a higher personal credit score to qualify on Funding Circle compared to it’s competitor Zopa. On funding circle you need a credit score of 620 compared to the 550 demanded by other websites.
Alternatives To Funding Circle
If you are in the United States, it would be easier to get loans at OnDeck. This listed online business loan provider has disbursed close to US$ 6 billion in loans to small businesses. The company offers term loans with the maximum loan size being US$ 500,000 .These loans are made available at interest rates of 10%. OnDeck also offers lines of credit to meet urgent financial requirements for interest rates starting from 14%.
The company intimates you of a decision within a few minutes of you submitting your applications. If you accept their offer and submit the necessary documents immediately you can get the loan amount disbursed within 24 hours.
OnDeck is the better option compared to funding circle because of the following reasons.
- It offers loans for a minimum tenure of one year compared to two years for Funding Circle.
- On Deck offers Lines of Credit which are not available from it’s rival lender.
- You can repay your loans on a daily or weekly basis on OnDeck. In Lending Circle only monthly repayments are accepted.