Getting started as an investor

A guide for investors

A GUIDE FOR INVESTORS

MAKE A RETURN AND A

DIFFERENCE

You can earn attractive, stable returns by lending to businesses through Funding Circle. Set up your account in minutes, then use our simple lending tools to lend to hundreds of businesses automatically. You can also open an ISA account to earn returns tax-free.

Your lending will help those businesses to grow and push the UK economy forward, and you’ll earn a return as they pay you back with interest. We believe it’s a better system for everyone.

About this guide

In this guide you’ll learn how to start lending, how to find your way around your account and other important information about lending through Funding Circle. If you have any questions, you can contact our Investor Support team by phone or email.

Contents

How lending works 4
Who am I lending to? 9
Your investor account 12
Your account summary
Lending options
Accessing your money
ISA account 21
Interest, tax and fees 25
Further information 27

How lending works

We connect established, creditworthy businesses looking for finance to investors with money to lend. Whether you have a Classic account or an ISA account, lending to businesses works in the same way.

Investors

Funding Circle reviews applications and only approves creditworthy businesses. We then pay out your funds to the businesses you lend to, and process your repayments.

Businesses

Businesses make fixed monthly repayments with interest, which we distribute to all the investors who lent to them.

The lending process

1. Find a business that interests you and decide how much to lend.

2. You can lend as little as £10 to a business.

3. If accepted, the loan is funded by lots of investors each lending small amounts. These are called loan parts. Each loan part represents the loan contract you and the business have entered into. You’ll be able to lend across lots of loan parts to build a diversified portfolio.

4. Repayments are reinvested As long as you keep lending active on your account, your repayments will be continuously lent out again on other loans. This helps your interest to compound, maximising your return.

5. Withdraw your funds You can pause lending and withdraw repayments as they come in, or look to sell loan parts to other investors (subject to demand).

How we manage risk

Only established businesses who have passed our rigorous credit assessment process can borrow through Funding Circle. However, it’s important to remember that some businesses will not be able to fully repay their loan. We call this a bad debt, and it’s already accounted for in your projected return. We reduce the impact it has on your return in 3 important ways:

Rigorous assessment with advanced technology

There are 3 key pillars to our assessment process:

1. Policy criteria
   We receive thousands of applications from all types of small businesses. To help our team focus on the right type of application, we have criteria in place that filter out businesses who have a low likelihood of being approved.
2. Statistical credit models
   Our proprietary credit model uses thousands of data points to assess the creditworthiness of every business that applies. Successful applications are then given a risk band from A+ to E (where A+ is lowest risk).
3. Expert judgement
   Each business is manually assessed by a member of our credit assessment team, who combine decades of experience from some of the world’s leading financial institutions.

Diversification

Diversification, where you spread your lending across many businesses, is the best way to earn a stable return as it reduces the impact of businesses being unable to repay their loans. By using our automated lending tool, you can easily lend to hundreds of businesses to quickly build a diversified portfolio.

As the minimum you can lend to each business is £10, lending at least £2000 will allow you to:

• Lend to at least 200 businesses
• Lend no more than 0.5% of your total to each one

Collections and Recoveries team

Funding Circle loans are typically supported by a personal guarantee from company directors. We also sometimes take other forms of security. If a business is unable to repay the loan, our team can look to recover the outstanding balance from the guarantors.

Who am I lending to?

You’ll lend to hundreds of established, creditworthy businesses in different sectors and regions throughout the UK. They may use their loan for a wide range of purposes, including to hire staff, buy new stock or equipment, open new premises or boost cash flow. All businesses will have been trading for 2 years or more.

Debbie Leon from Fashionizer

• Award-winning uniform designer
• Borrowed £195,000 for working capital

Types of businesses

There are two types of loans on our platform: small business loans and property finance loans.

Small business loans

Business owners may need finance for many reasons. Their loans will be covered by a personal guarantee from the directors.

Property finance loans

Lending through Funding Circle also helps experienced property professionals build new residential homes, refurbish existing properties, and access short-term finance. All property finance loans are secured against an asset.

Your investor account

Account types

At Funding Circle we offer two types of investor accounts; ISA and Classic. They work in the same way; however, the ISA account allows you to earn interest tax-free.

Getting started

You can set up your ISA or Classic account and start lending in a matter of minutes.

Accessing your funds

When you lend through Funding Circle, your money is matched to loans which are paid back over a period of up to five years.

When you want to withdraw funds you have two options:

1. Switch off lending to withdraw small amounts - You can withdraw your repayments as you go.
2. Sell loans to withdraw a lump sum - You can look to sell them to other investors using our automatic tool.

Interest, tax and fees

Interest

The interest you earn is paid by businesses on a monthly basis.

Tax

If you have an ISA account, any interest you earn from loans held within the ISA is tax-free.

Further information

Please visit our help centre for more details on a wide range of questions, including: What are the key features and risks of lending to small businesses? What happens if Funding Circle goes out of business? If you have any further questions or would like to speak to someone, our team are always happy to help.