Funding Circle reviews
Pros
- 10-minute online application.
- Loans are secured, so rates are pricey but not outrageous.
- Very transparent terms.
- Loan proceeds can be used for nearly any business purpose.
- Backed by a Who’s Who of equity investors.
Cons
- Loans require a lien on biz assets and personal guarantee from owners.
- Do not offer accounts receivable factoring.
- 5% penalty assessed on late monthly payments.
Funding Circle Reviews
See above info for Funding Circle Reviews. If you are a current or former Funding Circle customer, we’d like to hear from you. How was your experience? Are you a repeat customer?
Funding Circle Spotlight
- Headquarters: London U.K.
- In Business Since: 2011
- Funding Category: Small businesses
- Total Amount Invested: $7 billion+
- Primary Financing Method: Term Loans
Funding Circle is unlike any small business funding company we’ve profiled to date. Their source of capital comes from their peer-to-peer investing platform, which is then lent out to small businesses as term loans (thus, the funding ‘circle’). In the U.S. these investors are accredited individuals and institutions. The loans have maturities ranging from 6 months to 5 years with fixed, monthly payments.
To qualify for lending, applicants must provide the following information:
- Most recent 2 years of business tax returns
- Most recent 1 year of personal tax returns
- Most recent 6 months of business bank account statements
- All business debt information
- Personal guaranty forms for any 20%+ owner(s)
In the new fintech era, these documentation and collateral requirements are on the stricter/conservative side. But the interest rates received should be lower than online loans that are unsecured or requiring little documentation.
Funding Circle Rates and Terms
Funding Circle’s website has a number of helpful tools and calculators to determine the cost of funding. Here are a couple examples.
As they report on their website, the rates on Funding Circle loans range from 4.99% for top-rated borrowers to 27.79% for borrowers with lesser-creditworthiness. As you can see, the higher end of the rate range is higher than many business credit cards, but lower than merchant cash advances.
Here’s an example:
Say you’re a small business seeking a $50,000, one-year loan through Funding Circle. The online calculator reveals their $50,000 term loan would pay $1,930 in annual interest with a monthly fixed payment of $4,327.
The total cost of the loan would actually be $52,925, after accounting for a $995 origination fee, not included in the above calculation. That brings the APR to ~5.85%.
Funding Circle can also accommodate larger financing. From the calculator, a $250,000, 5-year term loan would have fixed, monthly payments of $5,099, representing $55,944 in total interest paid. The origination fee for this loan would be $14,975 bringing the total cost of the loan to $320,919.
While the model is clearly designed to provide terms for their most-creditworthy customers, they do disclose that fact. Most business applicants will not get these terms. Unlike other Funding Circle reviews, we uncovered this term sheet from their site (as of mid-October 2018) which shows a broader (more realistic) range of potential APRs:
| Maturity | Minimum Possible Rate | Maximum Possible Rate |
| 6 months | 4.99% | 22.79% |
| 1 Year | 5.49% | 23.29% |
| 2 year | 7.99% | 25.79% |
| 3 Year | 8.99% | 26.79% |
| 4 Year | 9.79% | 27.79% |
| 5 Year | 10.49% | 21.29% |
While Funding Circle’s rates aren’t cheap, we applaud the peer-to-peer lender for being extremely transparent with all fees and pricing. This transparency goes beyond the pricing model. They are the first online lender we found that disclosed that even so-called ‘soft’ credit checks can affect credit rating for entities structured as General Partnerships.
Keep in mind, Funding Circle’s term loans are secured, so rates are also determined by the level and types of collateral. Funding Circle counts accounts receivable, inventory, equipment and vehicles among eligible collateral assets.
Funding Circle provides online small business loans to customers from the following locations:
- San Francisco, California, U.S.A. (plus Denver, Colorado)
- London, United Kingdom
- Berlin, Germany
- Amsterdam, Netherlands
How is Funding Circle Different from Factoring Companies?
Funding Circle provides short term loans, not invoice factoring. This means that borrowing businesses will incur debt, where factoring company clients will not. However, they allow accounts receivable to be used as collateral for loans, which is why we included Funding Circle on our site. As such, the company is most similar to Lendio. Check out our Lendio reviews to see how they score stacks up to our Funding Circle reviews.
While factoring companies have their share of fees, Funding Circle’s can be pretty steep. The origination fee ranges from ~1%-7% and late fees are 5%. Those penalty payments are serious concern if you have a large monthly payment, so don’t be late.
And higher origination fees are commensurate with riskier credit profiles. Refer to our bad credit business loans article for a couple ideas on how to improve your business credit.
The company suggests that business borrowers who anticipate being late should call the company to see what can be done. But as the company is funded by investors, there is an inherent tug of war with lenience and profitability.
Finally, Funding Circle provides financing to businesses not typically covered by invoice factoring companies such as dental, medical and restaurants.
If you have pretty good to good credit and can pay on time, Funding Circle offers reasonable online loans.
Funding Circle Pros and Cons
In addition to the Funding Circle reviews above, we reiterate these key pros and cons:
Main Pros:
- 10-minute online application.
- Loans are secured, so rates are pricey but not outrageous.
- Very transparent terms.
- Loan proceeds can be used for nearly any business purpose.
- Backed by a Who’s Who of equity investors.*
Main Cons
- Loans require a lien on biz assets and personal guarantee from owners.
- Do not offer accounts receivable factoring.
- 5% penalty assessed on late monthly payments.