Funding Circle for Borrowers
Funding Circle Borrower Review
- Transparency - 5/5
- Availability - 5/5
- Customer Service/Reputation - 5/5
- Fees/Rates - 4.5/5
- Application Turnaround Time - 4/5
Funding Circle aims to have loans approved and distributed in 5 days after you accept the offer, which is much quicker than what you’d expect from a traditional bank loan, but a little longer than the turnaround time advertised by some of their competitors. However, Funding Circle offers larger loan amounts than most online providers. Here’s an overview of the application process:
Unlike some of their competitors, Funding Circle does not offer loans for new businesses or startup costs. Almost anything business-related beyond that, though, is acceptable. Costs associated with moving or expanding a business space, buying inventory or equipment, hiring new employees, or refinancing business debt are all approved.
Eligible applicants must have been in business for at least two years. A minimum credit score of 620 is also required. Additionally, all of the loans are secured, meaning you have to provide collateral on each one. Funding Circle doesn’t have rigid guidelines on the types of collateral required; equipment, vehicles, accounts receivable, and inventory can all be used.
Funding Circle’s main customer base is made up of small business owners who have solid businesses but need an alternative to a traditional bank loan. If your business falls into this category, Funding Circle can provide good interest rates and loan terms, as well as an account manager to see you through the application process. However, they do require quite a bit of information from applicants and there’s no getting around their strict basic requirements. Funding Circle is committed to practicing transparent loan practices and giving their borrowers fair terms, and it seems as though they can be trusted to do that, making them a great borrowing option for small business owners.
Funding Circle Securities is the investment part of the P2P company. However, only accredited investors are able to participate and invest in Funding Circle loans. To qualify as an accredited investor, you must meet the requirements set by the SEC, which can include showing an income of more than $200,000 in the last two years, or being able to show more than $1 million in assets (other than your house). Investors have to be ready to invest a minimum of $250,000 with a per loan minimum investment (or “note”) of $500. Given these numbers, becoming an investor with Funding Circle Securities is not for the casual investor, and there are notices on the website that warn that investors have to be prepared for risks and losses.
That being said, all of the Funding Circle loans are secured, are for established businesses, and have already undergone an entire verification process, so you don’t have to worry about weeding out startup business loans or loans for failing businesses yourself. In fact, you invest in portions of many different loans which helps to reduce your losses if any one of those loans default. There are two ways to build your portfolio: through selecting individual loans, or through the automated investing system. If you select individual loans yourself, you can view all the loan information as well as some details about the business itself. If you use the automated investing option, you can set your investment profile criteria and the system will automatically purchase small parts of different loans to minimize your risks.
There is a monthly fee of 0.083% per loan, which is deducted from your repayments and calculated on the outstanding principal amount of the loan; for example, a loan that has $100,000 left on it would have a monthly fee of $83. This adds up to a 1% annual fee.
Funding Circle is focused on giving accredited investors the chance to support small business owners through funding opportunities. The accreditation requirements significantly limit who can work with Funding Circle; however, if you meet the basic criteria, Funding Circle provides investors with the reassurance of knowing that all the secured loans have been thoroughly reviewed. Additionally, whether you select loans individually or utilize the automated investing tools, Funding Circle makes it easy to create a diverse portfolio of loans to minimize possible losses. The monthly fee per outstanding loan does need to be taken into consideration, but overall, approved investors have the potential to earn solid returns.
The reviews we found online were generally positive, with the main complaints focused on being repeatedly contacted by Funding Circle after turning down a loan, and that their loans are not for startup businesses. There were also a number of complaints from investors who wished that more information about the borrowing businesses was available. However, the number of negative reviews was pretty small, especially for an established business of this size.
Funding Circle is focused on providing loans for small business owners who can’t or don’t want to go to a bank and providing investment opportunities for accredited investors. This significantly limits who can work with Funding Circle on both sides, and there are fairly high requirements set for both groups as well. However, if you meet the basic criteria and are approved as a borrower or a lender, Funding Circle provides some solid borrowing and investing opportunities. For borrowers, the rates are good (even better than those provided by some competitors) and Funding Circle’s commitment to fair and transparent practices is a huge vote of confidence. For investors, you have the security of knowing that all the loans have been thoroughly reviewed and are secured with collateral, minimizing the overall risks that come with investing in small businesses.