Funding Circle

Funding Circle is a peer to peer lending service. The concept is fairly simple, you invest your money and they help you loan it to small businesses. The idea is that you can use microscopic amounts (£20 minimum) to mitigate risk, and secure a greater return than savings accounts whilst being more stable than securities. Using funding circle is outrageously simple. You throw money at them, then you can use this money to bid on loan requests. Once the loan is funded, you start getting paid monthly. If you're feeling particularly lazy (which I was), you can turn on an auto investor bot, which will buy a scattering of loans across all risk bands whilst also limiting your exposure to any one company.

There's another side to Funding Circle, there's also the loan market. The loan market is like eBay for loan parts, you can buy and sell pre-existing loans from other lenders. The potential for skimming is enormous, and people openly exploit it. Within hours of a new loan being funded there are often hundreds of loan parts available at a premium. The rationale for doing this is obvious. Traditionally you would hold the loan (and hence the risk) and after bad debt you might expect to make 7%. If you skim 0.1% from 5 year loans (the smallest premium you can charge) per day, you could see returns of 15% (Funding Circle charge their own 0.25% on the principal amount for a loan sale). For now though, they have no public API so personally skimming is impractical.

Finally, they seem to have a rolling offer where they give you and a friend £50 each if you loan £1000 within the first couple of months of registering after being referred (easy 5%!). If you'd like a referral, let me know 😉

written by Michael on 2017-02-11