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How our business operates

We connect creditworthy businesses looking for finance with people and organisations with money to lend. Our platform is more efficient and transparent than traditional lending, and we believe it’s a better system for everyone.

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Investors

Thanks to our online lending platform, a wide range of investors are now able to invest in SME loans. The platform enables both large and small investors to make incremental investments, and our investor base is deep, diverse and stable – ranging from retail investors to public bodies.

Since 2016, 40% of funding through our platform has come from global investors.

Borrowers

At Funding Circle, we focus exclusively on SME lending. Our borrower base is highly diversified across geographies and industries, which helps to ensure stable returns and mitigate the effects of adverse economic conditions.

As of 31 December 2018, borrowers across our geographies had on average around £950,000 of revenue, eight employees, a ten-year trading history and an average loan size of £70,000. 

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Our platform

At Funding Circle, our aim is to help SMEs grow by providing them with streamlined access to capital. To support this, we’ve developed a highly efficient and effective platform that enables SMEs to borrow money directly from investors.

The platform uses cutting-edge technology, proprietary credit models and sophisticated data analytics, creating a uniquely attractive and convenient proposition for borrowers and investors alike. It also provides high repeat rates, helping us to grow alongside our customers.

Through our platform, we’re able to serve and build long-term relationships with borrowers, providing them with the fast and flexible financing they need. For investors, the platform opens up an alternative asset class with attractive risk-adjusted returns.

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How we generate revenue

We generate revenue in two primary ways:

i) A transaction fee – typically ranging between 1% and 7% of the original principal balance of the loan, which is deducted from the loan proceeds paid to the borrower. 

ii) An ongoing servicing fee – of 1% per annum, calculated monthly on each loan (in most instances as a percentage of the outstanding principal balance of a performing loan).

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The virtuous circle

We believe that the nature and scale of our business model creates a “virtuous circle” that will continue to enhance our competitive position and market share around the world.

The speed, price, access and convenience of our offer are highly attractive to SMEs. As more SMEs come on board, we’re able to accumulate more data and improve the precision of our risk models, leading to higher acceptance rates and lower pricing for borrowers.

For investors, our platform presents an opportunity to quickly invest in a highly diversified loan portfolio, and to invest large sums of capital should they wish to do so. We also have a strong track record of delivering stable returns.

As more investors join the platform, the more valuable the platform becomes for the investment community. This then further enhances borrowers’ abilities to find loans quickly and efficiently. In 2018, 74% of lending came from existing investors.

Read more about the virtuous circle

Technology and data

Technology, data and advanced analytics are at the heart of our business proposition. Through the development of customer-centric technology, we’ve created an agile, responsive and unified money and loan management platform. Having built our technology from scratch, unlike many traditional banks we’re not burdened by the challenges and costs associated with legacy systems. We can therefore devote our resources to developing, innovating and further enhancing our bespoke technology.

 

A virtuous circle that drives continuous improvement and competitive advantage

Proprietary data

Over the past eight years, we’ve accumulated proprietary data sets across our various geographies, which we’ve continuously used to enhance our credit scoring models and improve the borrower experience.

Increased speed of funding

By attracting more investors to the platform, we’re able to increase the speed with which we provide funding to SMEs, which is a core value driver for borrowers.

Improving risk model

As we accumulate more data through applications and loan performance, we’re able to improve the precision of our risk models, which leads to higher acceptance rates and lower pricing for borrowers.

Higher loan conversion rate

This, in turn, results in higher conversion rates of borrower applications to loans, enabling us to serve a broader population of SMEs and reduce marketing and processing costs per loan. We’re also able to further reduce costs to borrowers and therefore attract more SMEs to the platform, reinforcing the positive data accumulation cycle.

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