Business Finance, the New Way
Banks have had substantial power over small enterprises for generations. There’s now a new alternative for business loans called Funding Circle. Funding Circle’s business loans are easy to get and cheaper than bank loans.
Funding Circle is a marketplace where people and companies can lend money to other businesses. People lend small amounts to lots of different companies to spread their risk. Each lender provides a small proportion of the overall loan that each business requests and with many different lenders competing to lend to them businesses are able to borrow at a better rate. Cutting out the banks gives higher returns for investors and lower costs for companies.
Interested investors go to the website and offer an amount and interest rate to borrowers. The loan is aggregated from the lowest interest rate offers in an auction process. Lending is quick and easy using autobid which automatically spreads money across enterprises. Alternatively, investors can individually choose businesses which they are interested in. Borrowers make a single monthly payment to Funding Circle who then distributes the payment back to lenders using a specialist technology platform.
Like a bank, Funding Circle has a credit assessment team who review each application and only let established and creditworthy enterprises into the community. It takes two to three weeks to get access to finance, compared to between six and eight weeks for bank loans. Companies can apply for loans up to GBP 100,000.
The latest data from the British Banking Association shows business finance is in decline. Funding Circle is a much needed alternative.