• Ludo Farine

Funding Circle ⭕ - The king of Peer-2-Peer lending

Funding Circle helps small businesses to take some loans. But they don't work like a bank, people like you act as the bank and therefore you get the benefits of higher interest.


If you have some spare cash, you would feel pretty upset to see low interest rates from your traditional savings account in your bank. There is another alternative though. Funding Circle is a peer-to-peer platform which allows investors like you 📣 to add your money. This money will be lent to small businesses over 6 months up to 5 years at a certain interest rate. In return, you will receive part most of this interest rate. And that can be a pretty good deal.


Receive £50 Amazon card when you first invest £2000

So how do I start?

Simply open a new account using my referral link. You can open a Classic account, Innovative Finance ISA or both. The advantage of the ISA one is that you will not pay any taxes on receiving interest but is limited to £20 000 investment 💰each year across all your ISAs. You can only open one Innovative Finance ISA a year. Once your account open, simply transfer money from your current account to your new account reference created in Funding Circle.

You can decide between 2 Lending settings: Balanced or Conservative. Balanced will lend your money across all risk-ranked of businesses (A to E) providing you potentially greater returns, as for Conservative, it only lends to less-risky businesses (A+ and A). The ranks are based on the financial history of each business, their type of business, basically giving a rating how likely they will be able to repay their loan.


So why is that a good deal?


The tables below give the interest rates you could get depending on the business risk band and the loan's term.

As you can see, the interest rates are very attractive where you can hope to receive from 4.5% up to 21.9%. However, the blended interest rate you can expect will 'only' be between 4.5-6.5%. Still pretty good.

But why how much lower compared to this table? Well, as any businesses 💼, some can be liable and become bankrupt where they can't get to repay their loan. Therefore you would lose that investment. About 10% of companies will not be able to repay their loans. But that's only statistics, this can be more and therefore you could lose money that you invested hence only investing what you are afford to lose.

Despite all this, Funding Circle want to function ans want you as an investor to gain from it too. This is why they would use the risk band system to overcome potential bankruptcy and hope for most investors to get 4.5-6.5%. After 2 years using Funding Circle, I personally have a 5% interest return.

Also they limit the risk by investing chunk of £10 🏦. So rather than lending £100 to one single business, it will first lend to £10 each to 10 different businesses. Therefore if one goes bankrupt you 'only' lose £10 rather than the £100.


You lend £10 to 10 businesses rather than £100 to 1 business

Funding Circle is perfect for those ready to try something new and potentially earn more. Less risky than the stock market, more rewarding than cash savings, #P2P lending is something that speaks to millennial. However, these can be seen as more risky as businesses come and go. Overall you can hope to have a positive return but make sure you only invest what you can afford to lose. And with a first £50 sweetener, give it a try.


Please read my full website Disclaimer before making investment decisions.

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