What is the funding circle?

Funding circle is a peer to peer lending platform for small businesses. It offers the most reasonable interest rates in the industry. Funding circle medium-term loan provides terms which are like SBA and bank loans. However, it funds your application in just a fraction of the time.

What funding circle offers?

Maximum term loan amount

£10k – £500k

Interest rate

Rates from 1.9%per year

Loan term

12 months – 5 years

These are the requirements you need to qualify for a loan:

  • the minimum annual revenue requirement

None

  • time in business

2 years

  • personal credit score

620

Funding circle doesn’t work with businesses:

That operate in industries like:

  • that want to use a loan to buy titled properties
  • adult entertainment
  • general contracting
  • guns and ammunition
  • aviation
  • investment management
  • commercial and trucking
  • investment banking
  • speculative (such as real estate development)
  • HVAC/plumbing

What you need to apply for a loan

  • 6 months bank statements of the business
  • 2 latest business tax returns
  • latest personal tax return
  • a business debt schedule
  • your profit and loss statement for the previous year
  • your credit balance sheet for the previous year

Things you must know:

  • funding circle can approve loan application within 5 to 15 days, depending on how quick the borrower provides a complete application. Typically, funding circle’s time for funding is 7 days. Funding circle can take the second position to another lender, but they will make that decision on a case-by-case basis.
  • funding circle doesn’t charge a prepayment penalty.
  • funding circle charges a beginning fee of 5.99%.
  • funding circle will pull your credit, but it will just do a soft pull except if the legal structure of your business is a general partnership. The company also pulls their credit from Experian.
  • funding circle doesn’t report to the personal credit bureaus however it does report to the business credit bureaus.
  • funding circle can work with businesses which have had below 5 tax liens in the past 10 years if a business can prove complete payment on those tax liens.

The underwriting procedure for funding circle

            Funding circle is not a sheet lender but is a marketplace. Through this marketplace, the company matches creditworthy small businesses looking for capital with investors who want to yield. On the contrary, a traditional sheet lender, every credit risk goes on your balance sheet and affects your outcome in case of default loan.

At the funding circle, the ripple effect is bigger, also a default can dampen investor’s confidence in the marketplace. Being attentive of both sides, the borrower and the investor makes funding circle better underwriters. Overall, the funding circle underwriting is holistic, as they look at your business and personal credit along with your income and expenditures for you and your business.

In addition, once you have submitted your application to the funding circle, you will have to speak to the credit team before the company can decide. Remember that after you submit a complete application the company will turn around with an offer in 3 days and if you accept their offer then you will be capable of accessing your funds in about 2 or more days.

Other significant aspects that you need to know

  • for funding circle, you need to have a business bank account.
  • funding circle requires 7 years to have passed since discharge if you have ever filed for personal bankruptcy.
  • funding circle requires any owner of a business that owns more than 20% to sign onto the loan.
  • funding circle doesn’t have a minimum debt service coverage ratio. However, they do prefer the average above 1.

Why you should work with funding circle?

            Funding circle offers some of the most reasonable business loans. Therefore, it is a specifically great choice if you wish to consolidate your debt. If you have a lot of credit card debt or short-term debt and you think that you can qualify for better interest rates, then you should consider conversing with funding circle team about consolidating your debt with their medium-term loan. In case you consolidate or refinance your business debt successfully with funding circle then you will be capable of switching to a monthly repayment loan with a lower interest rate.

In addition, the funding circle is particularly a better choice if you have good credit history and established business since generally you just need at least 2 years in business and to have a credit score of 620. Further, the funding circle’s loans provide a great balance among affordability and speed. It is a much quicker and affordable option compared to SBA or bank.

            In conclusion, if you have money in hand to repay the funding circle earlier, then you will save by avoiding the future interest rate you could have collected, and the platform would not charge you an early repayment penalty.

Funding circle post-funding

Once your application is funded, funding circle will start to debit funds one month after you get the funds and this process continues every month until you have repaid your loan completely. Keep in mind that at this stage, funding circle will file a blanket UCC lien on your business if and only if you get the funding from them.

As you repay your loan you can reach out to your personal account manager or broker at funding circle to review your repayment progress. Even though the funding circle does not have an online portal, the company will send you a paper statement to your business address.

The term loan offered by funding circle amortizes, this means that you will have to pay more interest in the beginning, however, it also makes it easier for you to understand what you owe if you are looking to repay the loan early. Furthermore, if you would like to renew your funding circle then you can start the process when you have made it 6 months into your original loan.

Funding circle review
  • Return Rate
  • Overall Safety
  • Time in Business
  • Lazy Investor Rating
4.5

Summary

100% unbiased. Based on my own experience investing with this large, well established peer to peer lender offering returns of up to 7%