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Funding Circle - Open For Business
The British public has defied banks and lent £1m to the UK's small businesses via Funding Circle in its first ten weeks. Funding Circle is the UK's first ever online marketplace where people can directly lend to small businesses. The social lending platform's success highlights the pent up demand for affordable finance from small businesses and the desire from consumers for better rates of interest on their money than available from banks.
35 credit-worthy businesses across the country have accepted loans via Funding Circle ranging from a water treatment company in Scotland, to a legal services provider in North Wales and a t-shirt printing company in London. Expansion / growth capital accounts for approximately half of all loans.
Average loan size of £30,000
Average interest rate 8.2 per cent, substantially below the 12 per cent that banks typically charge businesses
1,600 members with lenders aged from 18 to over 80
Businesses can borrow between £5,000 and £50,000 for either one or three years with the loans repayable monthly. Each loan is comprised of small amounts of borrowing from many different people who compete to lend to the business in question enabling it to borrow at a better rate. With no bank in the middle, both lenders and borrowers achieve a better deal.
Lenders set interest rates themselves with the lowest offers being accepted by the borrowers. To date lenders have received 8.2 per cent annual interest on average which far exceeds the typical savings account which pays less than 1 per cent.
The Funding Circle model has been designed to reduce risk to lenders. Experienced Funding Circle underwriters comprehensively assess each application using the same information that banks use and only allow established and creditworthy businesses into the marketplace. Approved borrowers are then split into risk bands to give lenders a clear indication of the level of risk entailed in lending to them. To date, all businesses have fully repaid on time. For more information go to www.fundingcircle.com