Funding Circle Business Loan
Good:
You are borrowing from other people at a significantly low rate and there are no banks involved
Bad:
You have to wait for people to agree to lend to you so it may take a bit longer to get your loan
Verdict:
New lender with a focus on funding for small businesses - loans with low interest rates but higher arrangement fees
Funding Circle offer a peer-to-peer lending service where people register to become a lender and others register to become a borrower. You can borrow up to £250,000 for a loan toward your business. You are effectively borrowing from other people rather than a bank or loan company.
Firstly, you need to become a member with them. You must then complete the application form including all details of your business on their website. Their underwriters will assess your application and let you know if you have been accepted as a borrower within two days. Your business is then given a risk rating, which is visible to the lenders. Then, you must post a loan request on Funding Circle's website. You will then receive offers from other people willing to lend to you. Your loan will not be funded just by one person, it may be funded by 50 people! Once your loan is fully funded with offers, you can accept the loan or wait to see if the rate comes down as other lenders bid. If accepted, the loan will be paid directly into your business bank account.
This might not be the best option for you if you need your money quickly as it can take up to two weeks. It is, however, convenient because you can do it all online, you don't need to meet the person that is lending to you and you don't need to tell them who you are, it is totally private. Their application is a bit longer and can take up to 30 minutes, so make sure you have all the business' information to hand as your session can time out if you do not save it. You don't need to meet with a bank branch manager or anything like that, other people just like you are the lenders.
Loan Calculator (Representative 8.4%APR)
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My favourite feature is the ability to sell your loans, should you want access to your money. This to me gives it the edge over ZOPA. You can also purchase loans, but this option does not include cash-back. Due to the risks, this should be seen as equivalent to an investment, and certainly NOT an alternative to a savings account.
Don't use the autobid funtion unless you really need to. It's better to keep control yourself and bid manually. A lot of people wait until the last few minutes before putting bid offers in. I get in early and offer a percentage I'd be happy with. (Don't be tempted to go too low just to get your money lent out) Spread your money across a variety of loans to reduce the risk. Finally, be prepared to lose some of your money. This is a very new idea so has a high risk associated with it. Now the good news! I'm currently lending at rates from 7.9% to 11%. My average lending rate is 9.4% A couple of my loans are for 12 months, the rest are 36 mo
- Your business must have a valid UK bank account/building society
- Your business must be based in the UK (excluding the Channel Islands and Isle of Man)
- Your business must have 2 years filed accounts
- If you are applying as a sole trader or partnership, it must be of more than 3 people
- Your business cannot have any outstanding CCJs over the value of £250
- Only limited companies and limited liability partnerships can apply
- Completion Fee - 2% of the loan amount
- If their re-attempt to collect the failed payment, they will refer the missed payment to a debt collections agency called BCW Group or other collections agencies that they may use from time to time
- The Collections Agency may charge you administration fees equal to 15% of the missed payment amount for their work
