The rise of peer-to-peer lending: A chance to ask Funding Circle

Bailey KursarAccount Manager,Funding Options

• Part of a team that helps businesses access a range of lenders with one application

• Works with the ICAEW and Forum of Private Business

• Find out more at www.fundingoptions.com or call 0845 366 4199

Laura McMullenResponsible for all introducer relationshipsat Funding Circle

• Has helped Funding Circle grow over the last two years

• Since launching in August 2010, Funding Circle has facilitated loans of £165 million to over 3,000 SMEs

• Find out more at www.fundingcircle.com

① Context around SME finance and trends in lending

② What is peer-to-peer?

③ How can Funding Circle help?

④ Q&A

What we’re going to cover

What’s the main reason you think businesses aren’t getting finance?

?

Businesses don’t know how or

where to applyBusinesses don’t think they will get

approval

Confusing array of finance products

Waiting for the economy to

improve

By approaching the bank their existing facilities may be

reducedBusiness

uncertainty

“Not even clear how much they want to borrow and what it is for”

“Many do not have adequate business plans or accounts”

Businesses don’t know how or

where to apply

Confusing array of finance products

Invoice

finance

Hire purchase

Leasing

Commercial mortgages

Government-

backed lending

schemes

Term loans

Overdrafts

Alternative

lenders

Crowd funding and peer-to-

peer

Merchan

t cash

advance

Short term

loans

7%of SMEs wanted to apply for a loan or overdraft but something had stopped them, with discouragement and issues around the process of borrowing most likely to be mentioned

Businesses don’t think they will get

approval

Business uncertainty

Waiting for the economy to

improve

2007 2008 2009 2010 2011 2012 Q2 2013 Jun-13 Jul-13 Aug-13

-6

-4

-2

0

2

4

6

8

10

Net

mon

thly

flow

£bi

llion

Is Peer-to-Peer lending the solution?

What is Peer-to-Peer lending?

?

Lending money directly to unrelated individuals or companies

Doesn’t go through a bank or traditional financial institution

Takes place online

What is Peer-to-Peer lending?

The rise of Peer-to-Peer

Source: P2P Lending report 2013, includes Zopa, Ratesetter and Funding Circle

The rise of Peer-to-Peer

The UK government is now supporting SMEs through non-traditional routes to finance

How aware of Funding Circle were you before this webinar?

?

Launched in August 2010 as the first UK Peer-to-Peer lender for businesses

They provide an online platform where lenders can ‘bid’ amounts and interest rates to become part of a loan

Lenders lend to lots of businesses, and businesses are lent to by hundreds of lenders

What do Funding Circle do?

Flexible business loans up to £1 million

Terms from 6 months to 5 years

Unsecured and secured loans, as well as asset finance. No early repayment charges

A community of over 50,000 individual investors ready to lend

What do Funding Circle do?

What do Funding Circle do?

Average rate 8.6% and no early repayment penalties

Unsecured loans

£5k - £150k

Suitable for a wide range of purposes

PG required

Secured loans

£100k - £1m

2nd charge OK

All asset security agreement, or

Charge on property

Asset finance

£20k - £1m

Suitable for a wide range of hard assets

Hire purchase agreement

100% LTV + VAT if required

What types of business do Funding Circle lend to?

What are the minimum criteria to apply?

Limited companies, LLPs and selected non-Ltd firms

Established companies: trading for 3+ years with at least 2 years of filed accounts

Good credit history. Upward or stable financial trends

Minimum turnover: £100,000

Directors: majority UK resident, good credit history

No CCJs over £250

How does the process work?

① Pre-approve your business online

② Complete full application in 15 minutes

③ Decision within 3 days

Applications are then credit assessed

Businesses are given a risk band at assessment which determines the rate on the marketplace

Businesses are listed online and lenders bid to be part of the loan

Funds can be transferred as soon as the full loan amount is reached

What fees are charged?

There are no fees to apply.

Borrowers are only charged fees on drawdown (2 year loans at 3%, 4 and 5 year loans at 4%).

Fees can be added or subtracted from the loan where possible.

£

E.g. Based on a £50k loan over 3 years, repaid in equal monthly repayments:

Cost (rate) Cost (amount)

Interest (annual rate) 6.0% £3,259.49

Fee 3.0% £1,500.00

Total cost = interest + fee £4,759.49

Monthly repayments £1,521.10

Do I need to offer a personal guarantee?

For most unsecured loans and some secured loans, a personal guarantee is required from one or several of the officers.

Normally required from the major controlling shareholders (25% and above).

May be joint and several. Also, cross company guarantees are possible.

Over 95% of guaranteeing officers are homeowners, but for loans below £50,000 if they are not a homeowner the application will still be considered.

A one minute case study

A leading property purchasing company was looking for short term finance in order to buy property at a lower gearing.

They wanted £300,000 over 60 months. With the help of Funding Circle and 4576 lenders, they achieved an interest rate of 9.98%.

Turnover: £9.9 million

Profit after tax: £764,000

Credit rating: B

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www.fundingcircle.com

To enquire about becoming an introducer to Funding Circle, email broker@fundingcircle.com or call 0203 667 2203.

info@fundingoptions.com0845 366 4199