Funding Circle Reviews - Financial Lender Pros & Cons


tamara-cohen writer
By Tamara Cohen
Updated January 10, 2022
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Funding Circle is a peer-to-peer lender specializing in loans to small businesses. Founded in the UK in 2010, to date the company has lent over $17 billion to 118,000 companies across 700 industries. 

Small businesses are at the heart of Funding Circle’s business. The company has built a machine learning and technology platform to facilitate fast decision making on business loans between $25,000 and $500,000 for established small businesses at competitive rates, making it easy for company owners to access capital to grow their businesses without having to go through a long, clunky application process.

The idea for Funding Circle emerged in the wake of the 2008 financial crisis, after the two co-founders found it impossible to secure funding on reasonable terms for a flourishing gym business. At the same time, investors were struggling to gain good returns. The obvious solution was to bridge the gap with a platform that offered investors the opportunity to diversify their fixed-income portfolios, while offering small businesses the credit they required to grow their businesses and drive the economy. 

Believing small business owners deserved better funding options, Funding Circle joined forces with other industry players to create the Small Business Borrowers’ Bill of Rights, which includes the right to transparency, responsible underwriting, fair collection practices, and more. To date, nearly 60 small business lenders, brokers, and lead generators have committed to uphold these rights. 

Funding Circle was launched in 2010 as the UK’s first peer-to-peer lending platform, expanding three years later to the United States. Since then, the company has also opened offices in Germany and the Netherlands, and is listed on the London Stock Exchange (FCH). 

The company’s international leadership team and board of directors includes people with experience within leading financial services companies, including Bank of America, Barclays Capital, Goldman Sachs, and J.P. Morgan. 

About peer-to-peer lending

Peer-to-peer (P2P) lending, sometimes referred to as “social” or “crowd” lending, allows business owners to access funding for their enterprise by going directly to investors, cutting out the financial institutions’ middle men. This means that P2P lenders can typically offer better rates to borrowers than banks can, while investors benefit from higher returns on their investment than they might otherwise achieve. 

P2P lending first emerged online in 2005 and has since flourished, with a number of websites such as LendingTree, StreetShare, and of course Funding CIrcle, dedicated to facilitating the transactions. While some offer loans for personal needs, such as home improvements or car purchases, others specialize in lending to small business owners looking for capital to grow their enterprise. 

Who is Funding Circle for?

Funding Circle specializes in peer-to-peer funding for established businesses who seek credit to meet their business goals. For this reason, applicants must have been trading for at least two years to qualify for a loan with Funding Circle. Loans are also awarded subject to a credit check, although applying for a loan will not affect your credit score. 

The average profile of borrowers with Funding Circle is as follows: 

What do they offer?

In the United States, Funding Circle offers three types of loans: business term loans, SBA 7(a) loans, and lines of credit. 

Business Term Loan

This sort of loan is the most straightforward financing option for small business owners who are already established, and can be used for achieving long and short term business goals.  

Business owners are awarded the loan amount as an upfront lump sum, and repay the capital on a set schedule of biweekly or monthly payments over a period between six months and five years. There is no penalty for early repayment. Some of the loans on offer require collateral, especially longer term loans of three to five years. 

The APR on these types of loans varies depending on the creditworthiness of the borrower and the time scale over which the loan is expected to be repaid. 

SBA 7(a) Loan

The U.S. Small Business Administration (SBA) runs several small business loans, of which the 7(a) is one of the most popular. Rather than offering these loans directly, the SBA partners with approved lenders and guarantees between 50% and 90% of the loan, depending on the type of loan taken. 

The SBA sets certain eligibility requirements, and the owner must be reasonably investing in the business to qualify. The applicant must have first sought other means of funding, including utilizing personal assets, before applying. In addition, the company must be a for-profit registered in the United States or its territories to qualify. 

SBA loans may allow you to access a greater loan amount at a lower interest rate and over a longer payment period than a standard loan. However, the application process can take one to two months, meaning a longer wait before getting access to the funds. 

Lines of Credit

Similar to a credit card, a line of credit allows the borrower to draw down on the credit as needed and only pay interest on the amount borrowed. This option offers the ultimate flexibility, as repaid amounts can be borrowed again when needed without applying for a new loan. This allows business owners to manage their cash flow on an ongoing basis. With Funding Circle, the line of credit is unsecured, meaning you don’t have to put up any collateral to access the loan.  

The line of credit works by allowing you to withdraw as little as the minimum amount (usually $500), all the way up to your maximum limit, and then pay it back over a daily, weekly, or monthly schedule for a specific term, typically six or twelve months. 

This option is ideal for businesses who want to keep funds on reserve for slow periods or unexpected expenses. It also suits businesses that regularly experience credit crunches in their cash flow cycles, such as manufacturers. 

Costs involved in a line of credit can include an opening fee, monthly or annual maintenance fees, and draw fees when the credit is accessed. 

Are there any limitations? 

In general, to qualify for funding with Funding Circle, businesses must meet the following minimum requirements:

How does it work?

Applications for a loan from Funding Circle are filled out on their website. The first step is to fill out the application form, which takes a few minutes. There is no charge for filling out the application, and you are not obligated to accept a loan if your application is approved. 

Within an hour of completing the application, you will be contacted by a personal account manager, who will assist you with the application. They will ask you some questions to learn more about your business, your goals, and your plans for the loan. The personal account manager will explain the process, search for favorable terms for you, and walk you through the various loan options. 

They will also gather the documentation required, which may include the business’s tax ID number, names of shareholders, the owners’ social security numbers, and your driver’s license number and state of issue. They may also want to see further documentation, such as the two most recent years of tax returns and the last six months of bank statements. 

The application is then passed on to Funding Circle’s underwriters, who review it within 24 hours and, if successful, will make an offer. This will include the loan’s interest rate, repayment term and monthly payment. Upon acceptance, the money will be transferred and available within one business day. 

Company contact details

707 17th Street Suite 2200 Denver, CO 80202

Email: loanquestions@fundingcircle.comWebsite: www.fundingcircle.com

Funding CIrcle also has offices in the UK, Germany, and the Netherlands: 

London, UK: 71 Queen Victoria Street, London EC4V 4AY

Berlin, Germany: Bergmannstraße 72, 10961 Berlin

Amsterdam, the Netherlands: Strawinskylaan 631, World Trade Center, 1077 XX Amsterdam

FAQs 

How is Funding Circle different from a bank?A typical bank fulfills a wide range of functions, from offering current, savings, and business accounts to offering loans, mortgages, credit cards, and much more. Within this model, each customer deals independently with the bank, although funds deposited may be used by the institution to finance loans and credit. 

Funding Circle, on the other hand, acts only as a facilitator for direct transactions between investor and borrower. Consequently, it’s focus is solely on managing the loan application process and on managing the disbursement and repayment process. 

This focus has enabled it to create cutting-edge technologies to support these functions, allowing Funding Circle to offer a vastly more streamlined, quick, and easy application process. 

Who regulates Funding Circle?

Funding Circle is fully compliant with federal, state, and local regulations in each of the states in which it operates, as well as regulations enforced by the Securities and Exchange Commission, the Federal Trade Commission, and other federal agencies.

Does Funding Circle charge any fees?Funding Circle charges a one-time origination fee on each new loan of between

3.49% to 6.99%. As with the interest rate, the fee is determined during the underwriting process, based on creditworthiness and the loan term, and will be made known during the offer.

Funding Circle also charges borrowers a fixed fee of 5% of missed payment amounts. The fee is added to the payment when it is taken, and is passed directly to investors. 

There is no early repayment penalty fee. 

For investors, there is a 1% annual servicing fee on the outstanding amount of loans, which is deducted from the loan payments made by borrowers.

What customers are saying

Funding Circle includes a number of video testimonials on their website. Here is what two satisfied clients had to say: 

"I sought financing from Funding Circle right before COVID lock-downs hit New York. All non-essential construction was shut down for three months; the bills still kept coming, so that additional financing is what kept us up and running. 

“My business has been able to thrive since I reached out to Funding Circle. We've been able to add additional employees, take on more projects, increase our revenue, and it's just been a godsend. 

“I would recommend Funding Circle for anyone looking for additional financing for their company. They definitely helped me, and it was a quick and easy process and very straightforward, and I just felt that they were an honest, reputable company.”

 - Louis Stavropoulos, FMT Technologies

"We've been in business for about 15 years. The reason we were looking for external funding is for expansion. The financing we were able to acquire from Funding Circle helped us to acquire the property and the funds helped us to finalize the construction which we are currently under. 

The Funding Circle application process is fantastic and beyond easy. The first time I went to Funding Circle I submitted my application, I'll never forget, January 22, 2018. I was approved on the 23rd, which is the following day, and I had my funds on Friday. 

As far as what I would like people to know about Funding Circle, I would say just do it 'cause it'll be the best choice you ever made."

- Cristy Fernandez, SPC Services.  

Funding Circle is rated “excellent” by 83% of reviewers on Trustpilot, giving the platform an overall rating of 4.6 out of 5. 

However, 9% of reviewers rated Funding Circle “bad”. Typical complaints were around the amount of time it took Funding Circle to process their application, lack of human contact both during the appliance process and once a loan has been approved, and uncertainty over APR rates. 

One reviewer wrote on November 27, 2021:

“I'm a P2P lender with them, but as soon as the government started guaranteeing COVID 19 loans, they froze out all of their investors. Those being the people that gave them the capital to build their business in the first place.

“Now Funding Circle offers out loans without risk to their business while the P2P investors are left with all the bad debt and loans they can't sell or exit out of.”

Another wrote on November 18, 2021:

“Bait and switched me. Told them I didn’t want to do a second loan if it would be a higher rate than my existing one with them (10%). Loan agent acknowledged this repeatedly, knew my deadline for funding, and pushed me right up to it and then at the last second revealed a rate of almost 20%, and they knowingly left me with no time for options. And there's no fixing it because their huge origination fee comes out of your proceeds so you can't just refinance the debt, you've already lost a lot. I did attempt to get resolution for this but they don't care. Just a bully fintech company too busy rolling in cash to care.”

Funding Circle has gained accolades from industry insiders. In January 2020, Funding Circle was ranked first for ‘Business Lending’ in the Center for Financial Professionals (CeFPro) FinTech Leaders 2020 Report. 

Andreas Simou, Managing Director, CeFPro said: “Funding Circle’s pole position in the Business Lending category was entirely decided by industry votes and can be considered an endorsement by their peers with what has been achieved in such a relatively short period of time”.

Review and summary

Pros
  • Funds available within days
  • Competitive APR
  • No penalty for early repayment
Cons
  • Automated service lacks human interaction
  • No option for customers with subpar credit
  • Application processing can be delayed

How does Funding Circle rate?

Affordability
4 out of 5 stars
  • Competitive APR
  • One-off origination fee taken from loan disbursement
  • No early payment penalties
  • Only open to companies with good credit history 
Transparency
3 out of 5 stars
  • No hidden fees. 
  • Loan calculator gives indication of likely repayments before applying
  • May pass your details on to third parties
Ease of use
4 out of 5 stars
  • Quick application process takes less than six minutes
  • Funding can be accessed within a week
Customer experience
3 out of 5 stars
  • AI-based application process means a decision is made quickly.
  • Highly automated process means human contact element is missing.

Summary

Funding Circle offers a highly competitive alternative to banks for the owners of established small businesses who want to grow their business. Their focus on only serving small businesses means that their application process is set up to be quick and transparent, giving applicants an answer, and if successful, funding, within a few days. 

Funding Circle’s fees plan is simple and transparent, eliminating surprise charges. 

On the downside, it’s focus on delivering fast service through machine learning means that there is a lack of human interaction, which can be frustrating when things don’t go as planned. 

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