Non-bank Fundraising via Funding Circle

Are you fed up with waiting to hear if your bank will lend you the cash you need to take your business to the next stage? Or just daunted at the very prospect of asking for it? If you are a limited company or limited liability partnership with two years accounts filed and a turnover that has reached £100,000, you may do better through Funding Circle.

Advantages for Borrowers

Loan deals with this non-bank online funding facilitator are often better than you would get from a bank supposing it did offer you a loan, even factoring in the initial fee once a loan is agreed.

Goodbye to reams of forms, almost impossible security arrangements and other hoops to jump through before several months of waiting for a reply from the bank. You apply on-line with Funding Circle, which normally takes about 20 minutes. Then you have a chat with a decision-maker and get an answer in a couple of days. Why not ask your outsourced bookkeepers what they think of the system, and whether they know of anyone who has used it, either as a borrower or investor.

You can borrow between £5,000 and £1 million depending on your position and what you want to achieve. Your request will attract investors who bid in an on-line auction with the amount offered plus the interest required. You then have up to 14 days to accept the lowest interest offers. The funds will then be transferred to your account or they can go straight to a supplier if they are to purchase one or more assets.

Typical interest levels are around 7-10% for those who are prepared to wait out the auction for 14 days. The levels are usually much lower than you would incur with a bank. The total amount you repay includes the one-off fee to Funding Circle. In an example, a company borrows £40,000 over 4 years. Its total repayment of £46,165 includes a fee to Funding Circle of £1600. Monthly repayments are £962.

Advantages for Lenders

If you are in the fortunate position of having some spare cash you would like to put to work, you could instead become an investor with Funding Circle. You could spread your money around among a number of small businesses which have been assessed for their ability to repay. Get your bookkeepers to look into this and they may report that it is relatively low risk. The company claims that the average net return, before tax but after fees and rare bad debts, is 5.8% - possibly more than it would earn in a bank account these days. You would also have the feel good factor of knowing you were helping other small businesses to develop.

For anyone who needs early and swift access to their money, Funding Circle also facilitates the selling on of parts of loans to other investors – again for a small fee – which normally only takes a few days. You can even start your account with Funding Circle by purchasing some of these part loans at the level of risk that is comfortable for you.

Whether you want to borrow or invest, Funding Circle may well be the way to go.