Funding Circle, as an online business loan company, is dedicated to providing small businesses with the funding they need to grow, especially for solid, established businesses who don’t have the time or resources for a lengthy bank loan application process. Funding Circle uses a peer-to-peer (P2P) lending platform to achieve these goals, and it gives business owners with good cash flow an opportunity to get a flexible loan with a quick and easy process. The requirements for securing a loan are a little strict and the whole application process is pretty thorough, but Funding Circle rewards their customers with an individual loan specialist, as well as honest and transparent loan terms and business practices. This approach seems to be working, too, as very few complaints have surfaced—for example, the Better Business Bureau (BBB) has received only five complaints in the last three years at the time of this writing. For those who meet the minimum criteria, the strict borrowing requirements are an added bit of security and confidence compared to some other online lenders. Overall, if you are an established business looking to grow with a loan you can pay back monthly, Funding Circle is reliable lender with a great track record; read on to find out more.
Funding Circle for Borrowers
Funding Circle Borrower Review
- Transparency – 5/5
- Availability – 5/5
- Customer Service/Reputation – 5/5
- Fees/Rates – 4.5/5
- Application Turnaround Time – 4/5
Nothing to hide
One of Funding Circle’s greatest strengths is transparency about their loan terms. They provide a chart online with the interest rate ranges for each loan term amount from six months to five years. They are also just as upfront about their origination fee, late payment fees, and non-sufficient funds fees, which says a lot about their dedication to being honest with their customers.
Funding Circle’s transparency is part of their commitment to the Small Business Borrowers’ Bill of Rights, which essentially states that borrowers have the right to transparency and fair borrowing terms. Though Funding Circle is not the only lending company to have signed the Borrowers’ Bill of Rights, it says a lot about their company policies that the Bill of Rights information can be easily found on their website in several places.
Borrowing with funding circle: How it works
Funding Circle aims to have loans approved and distributed in 5 days after you accept the offer, which is much quicker than what you’d expect from a traditional bank loan, but a little longer than the turnaround time advertised by some of their competitors. However, Funding Circle offers larger loan amounts than most online providers. Here’s an overview of the application process:
- Fill out the online application. If you don’t meet the basic criteria for a Funding Circle loan, they’ll let you know right away, and there is no impact to your credit score.
- A loan specialist will call you within one hour of submitting your application to review your information and get to know your business.
- Submit verification documents.
- Once the loan terms are accepted and signed, the loan will be funded within a few days.
Using your Funding Circle loan
Unlike some of their competitors, Funding Circle does not offer loans for new businesses or startup costs. Almost anything business-related beyond that, though, is acceptable. Costs associated with moving or expanding a business space, buying inventory or equipment, hiring new employees, or refinancing business debt are all approved.
Eligible applicants must have been in business for at least two years. A minimum credit score of 620 is also required. Additionally, all of the loans are secured, meaning you have to provide collateral on each one. Funding Circle doesn’t have rigid guidelines on the types of collateral required; equipment, vehicles, accounts receivable, and inventory can all be used.
- Fixed monthly interest rates from 4.99% to 27.79% APR
- No prepayment penalties
- Loan term lengths range from 6 months to 5 years
- Access to individual account manager
- Short estimated approval time (24 hours)
- Online resource center for small business owners
- Committed to the Small Business Borrowers’ Bill of Rights
- Large loans only, from $25,000 to $500,000
- No loans for businesses younger than two years
- Must have minimum credit score of 620
- Origination fee of 3.49% to 7.99% of the loan principal amount
- Loans are secured and require collateral
- 5% late payment fee
The Bottom Line for borrowing from Funding Circle
Funding Circle’s main customer base is made up of small business owners who have solid businesses but need an alternative to a traditional bank loan. If your business falls into this category, Funding Circle can provide good interest rates and loan terms, as well as an account manager to see you through the application process. However, they do require quite a bit of information from applicants and there’s no getting around their strict basic requirements. Funding Circle is committed to practicing transparent loan practices and giving their borrowers fair terms, and it seems as though they can be trusted to do that, making them a great borrowing option for small business owners.
Funding Circle for Investors
Funding Circle investor review
- Investment Restrictions/Flexibility- 3/5
- Investment Options – 5/5
- Availability – 5/5
- Screening Process – 5/5
- Customer Service/Transparency – 4.5/5
For accredited, not casual, investors
Funding Circle Securities is the investment part of the P2P company. However, only accredited investors are able to participate and invest in Funding Circle loans. To qualify as an accredited investor, you must meet the requirements set by the SEC, which can include showing an income of more than $200,000 in the last two years, or being able to show more than $1 million in assets (other than your house). Investors have to be ready to invest a minimum of $250,000 with a per loan minimum investment (or “note”) of $500. Given these numbers, becoming an investor with Funding Circle Securities is not for the casual investor, and there are notices on the website that warn that investors have to be prepared for risks and losses.
That being said, all of the Funding Circle loans are secured, are for established businesses, and have already undergone an entire verification process, so you don’t have to worry about weeding out startup business loans or loans for failing businesses yourself. In fact, you invest in portions of many different loans which helps to reduce your losses if any one of those loans default. There are two ways to build your portfolio: through selecting individual loans, or through the automated investing system. If you select individual loans yourself, you can view all the loan information as well as some details about the business itself. If you use the automated investing option, you can set your investment profile criteria and the system will automatically purchase small parts of different loans to minimize your risks.
There is a monthly fee of 0.083% per loan, which is deducted from your repayments and calculated on the outstanding principal amount of the loan; for example, a loan that has $100,000 left on it would have a monthly fee of $83. This adds up to a 1% annual fee.
- Fund portions of loans to established businesses that are making money to avoid risky startups or failing businesses
- All loans are secured
- Diversify your investment portfolio outside the stock market
- Automated investing, making it possible to earn passive income
- Only accredited investors are able to invest
- Minimum investment of $250,000 and a minimum note size of $500
- A 0.083% monthly fee per loan
The Bottom Line for Investing with Funding Circle
Funding Circle is focused on giving accredited investors the chance to support small business owners through funding opportunities. The accreditation requirements significantly limit who can work with Funding Circle; however, if you meet the basic criteria, Funding Circle provides investors with the reassurance of knowing that all the secured loans have been thoroughly reviewed. Additionally, whether you select loans individually or utilize the automated investing tools, Funding Circle makes it easy to create a diverse portfolio of loans to minimize possible losses. The monthly fee per outstanding loan does need to be taken into consideration, but overall, approved investors have the potential to earn solid returns.
Funding Circle reviews: What customers think
The reviews we found online were generally positive, with the main complaints focused on being repeatedly contacted by Funding Circle after turning down a loan, and that their loans are not for startup businesses. There were also a number of complaints from investors who wished that more information about the borrowing businesses was available. However, the number of negative reviews was pretty small, especially for an established business of this size.
Final Thoughts on Funding Circle
Funding Circle is focused on providing loans for small business owners who can’t or don’t want to go to a bank and providing investment opportunities for accredited investors. This significantly limits who can work with Funding Circle on both sides, and there are fairly high requirements set for both groups as well. However, if you meet the basic criteria and are approved as a borrower or a lender, Funding Circle provides some solid borrowing and investing opportunities. For borrowers, the rates are good (even better than those provided by some competitors) and Funding Circle’s commitment to fair and transparent practices is a huge vote of confidence. For investors, you have the security of knowing that all the loans have been thoroughly reviewed and are secured with collateral, minimizing the overall risks that come with investing in small businesses.