Funding Circle Review – Small Business Loans
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Funding Circle is a peer-to-peer lending service that provides an alternative to bank loans to small businesses in the U.K., U.S., Germany, and the Netherlands.
9/10
Cost
9/10
Features
9/10
Ease of use
8.5/10
Services
9/10
Who hasn’t thought of starting a business? If you’re a business owner or considering becoming one, you may be curious about getting funding for your business. Funding Circle is a peer-to-peer lending platform (also known as a lending circle) that connects small businesses with partner lenders willing to invest in them. The easy application process and quick funding options make this an attractive option for many businesses. However, there are some drawbacks that you need to be aware of as well.
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What is Funding Circle?
Funding Circle is a loan platform for small businesses available to businesses in the U.K., U.S., Germany, and the Netherlands. The platform connects small businesses looking for loans with investors looking to invest in small businesses.
The idea for Funding Circle was born after the financial crisis in 2008. In 2010, Funding Circle launched as the first peer-to-peer lending platform for businesses in the U.K. The success of this initial launch led Funding Circle to expand to the U.S. just three years later and to Germany and the Netherlands just two years after the U.S. launch.
While Funding Circle is not a bank and does not loan businesses money, it does serve many important functions in the small business loan process. After connecting a small business with an investor, Funding Circle underwrites your loan application and manages the loan disbursement and repayment process.
Use Quicken Loans to Get a Personal Loan
- If you're tight on cash right now, you may want to consider getting a personal loan. A personal loan is a loan that you can use for just about any purpose like: paying off other debt, renovating your home, or family needs like a wedding or adoption.
- TrustPilot Rating 4.6 out of 5
- Connect with lenders for $0
- 100% online experience.
How does Funding Circle work?
As a small business, the first step to getting a small business loan through the Funding Circle platform is to apply. You can find the application on its website.
Before you get started, Funding Circle is upfront and answers questions that you’re bound to have. It states that there is no cost to apply for a small business loan through Funding Circle and that applying will not affect your credit score. There are also no prepayment penalties, which is good to know, should you be approved for a loan.
If you’ve already started an application and need to come back to continue and submit it, this is also where you’ll want to go.
Next, you’ll fill in basic information about the business that you want to get a loan for. This includes the business’s legal name, the business owner’s name, and contact information.
You’ll also need to provide information about the loan that you’re seeking, including a loan amount and your preferred loan term.
Before continuing, you’ll need to check the box to agree to use this information to complete an application with Funding Circle or one of its partners.
After completing this information, you’ll be taken to the next step, which is determining your business’s eligibility for a Funding Circle loan.
If you received a Funding Code from Funding Circle, you’ll enter it on this page.
Based on your answers, you’ll be told whether or not you’re eligible for a loan through Funding Circle. To be eligible, you must have been in business for at least 2 years. The owner’s credit score has to be 660 or higher. There cannot have been a bankruptcy in the past 7 years. And, finally, if your business is located in Nevada, you’re out of luck because Funding Circle can’t provide loans in Nevada due to state commercial lending regulations.
Related: Best Personal Loans for Bad Credit
If you’re eligible, you’ll move on to the next step where you’ll provide more information about your business.
This includes the purpose of the loan, so if you’re not sure yet how you would spend your loan money, now is a good time to think about it! You can select more than one option.
The application then asks for your business address.
Note: If your business’s physical address is different from the legal business address, you’ll need to provide both addresses.
If your business has more than one owner, you’ll also need to supply the additional owner’s information. (And yes, I did provide the name “a a” as the owner of my pretend business. I’m surprised that it let me do so.)
Now it’s time to get personal. As the business owner, you’ll need to provide personal information, including your social security number, birth date, and homeownership status.
After you’ve submitted this information, you’ll move onto the document portion of the application. You’ll need to submit certain documentation — including your last 12 months of business bank account statements — before you can receive a decision on your loan.
Once you’ve uploaded the required documents, you can submit your application. Funding Circle appears to make decisions relatively quickly after you’ve submitted a complete application and claims that you can hear back with a decision in as little as 24 hours.
If you need time to gather documentation, you can save and continue your application. In the meantime, you can expect a call from a personal account manager to review your next steps. This is when you’ll discuss your business’s needs and which funding option will work best.
How much does Funding Circle cost?
Applying for a Funding Circle loan is free. However, there are still costs associated with the loan itself to consider.
The good news is that Funding Circle doesn’t charge many fees. For example, there are no servicing fees or account managing fees if you receive a loan. There are also no monthly processing, maintenance, or transaction fees. This helps you keep the total cost of your loan low. Then, if you want to and can pay off your loan early, you won’t be charged any prepayment penalties.
The fees that you can expect with a Funding Circle loan are:
- Origination fee.This is a one-time fee that is meant to pay for the time that Funding Circle spends evaluating and originating your loan. The origination fee is based on your credit history and typically comes out of your total loan amount. You’ll only be charged an origination fee if you receive a loan from Funding Circle. The origination fee can range from 4.49% to 10.49% of your loan.
- Late payment fee.If you receive a loan, you will have a monthly payment amount to repay your loan. If you’re late making a payment, a fee will be added to your monthly payment amount. The late fee is 5% of the amount of the missed payment.
Related: Best Peer-to-Peer Lenders
Use Quicken Loans to Get a Personal Loan
- If you're tight on cash right now, you may want to consider getting a personal loan. A personal loan is a loan that you can use for just about any purpose like: paying off other debt, renovating your home, or family needs like a wedding or adoption.
- TrustPilot Rating 4.6 out of 5
- Connect with lenders for $0
- 100% online experience.
Funding Circle features
Funding Circle offers many kinds of business loans. If you’re unsure which one is right for you, you can talk to someone at Funding Circle for guidance on choosing the right loan type. If you apply for a loan, you can speak to the person who reaches out to you to discuss your application.
To give you an idea of what you may be able to get from Funding Circle, let’s go over the loan options.
SBA 7(a) loans
This is the U.S. Small Business Administration’s (SBA) primary program, one of the most common loan types for small business owners. If you get this type of loan, the SBA will guarantee most of your loan amount. If you default on your loan, the SBA will assume responsibility for it, up to a certain percentage of the total loan amount.
You may want to consider this loan type if you’re looking to fund inventory, working capital, equipment, or debt consolidation. Loan amounts range from $30,000 to $5 million and come with an up to 10-year loan term. The company says it can fund the loan within 13 days.
Term loan
Term loans offer a more flexible solution for some business owners. Funding Circle helps business owners by providing the funds in as few as three days after approving an application. You can get a term loan ranging from 6 months to seven years. Term loan amounts vary widely, ranging from $25,000 to $500,000.
Line of credit
A business line of credit allows businesses quick and easy access to money when needed. Instead of a lump-sum payment, a line of credit is a credit account. Like a credit card, borrowers have a credit limit and can withdraw money against their line of credit when needed. Withdrawals are sent to your bank account, and you’ll repay the amount you borrowed over a specific repayment term.
With a business line of credit from Funding Circle, you’ll only pay interest on your withdrawn funds. You can take out credit lines of up to $250,000.
Who is Funding Circle best for?
- Established businesses.To be an eligible borrower, your business must already be established. Funding Circle requires businesses have been around for at least 2 years to be matched with a lending partner.
- Seasonal businesses.Funding Circle offers products that can help seasonal businesses or other businesses with an unsteady cash flow. While there are factors such as higher fees and repayment structures to consider, options such as merchant cash advance and working capital could be just what some businesses need.
Who shouldn’t use Funding Circle?
- Startups.Unfortunately, Funding Circle is not the place to go if you’re looking to fund a startup. While it is a peer-to-peer lending platform, the eligibility requirements rule out any opportunities for startups.
- Businesses that need less than $25,000.Funding Circle has a minimum loan amount of $25,000, which rules out enterprises looking for a smaller loan.
Pros and cons
Pros
- Funding Circle assigns borrowers a dedicated loan specialist who can help you identify the right loan option.
- There are several types of loans and loan alternatives in which to choose.
- Generally speaking, online lenders tend to offer more affordable options with fewer fees than a traditional bank loan.
Cons
- Funding Circle matches you with a lending partner instead of lending funds itself. If you’re someone who wants to build a personal relationship with your lender, it may not be for you.
- Funding Circle only provides peer-to-peer lending services for business loans and can’t be used for personal loans.
- Unfortunately, customer support seems to be a bit lacking. While you can be assigned a loan specialist to help you after you’ve filled out an application, there doesn’t seem to be much support otherwise. There is a general phone number and email address, but no live chat feature or specific contact options.
Funding Circle vs. competitors
Company | Loan options | Business loan amounts |
Funding Circle | Small business loans | $25,000 to $500,000 |
LendingClub | Personal loans, small business loans, auto refinance | $5,000 to $500,000 |
Lendio | Small business loans | $5,000 to $5 million |
LendingClub
LendingClub is a peer-to-peer lending platform, just like Funding Circle. In addition to business loans, LendingClub offers personal loans and auto refinancing loans to qualified borrowers. When it comes to the application process, LendingClub handles things a little differently than Funding Circle. Instead of taking you directly to the application, LendingClub asks you to enter your desired loan amount, your email address, and the purpose of your loan. Then, you’ll click on a get quote button, and that’s when you start filling out the application with your personal and business information.
Unlike Funding Circle, no page shows you all of the loan and funding options for businesses. Instead, you have to fill out an application and wait to see what loans are offered to you. LendingClub’s main focus appears to be personal loans, but its lower minimum small business loan amount may make it an attractive option for businesses that want smaller loans.
Lendio
Lendio is another lending platform that focuses on helping small businesses get quick and easy funding affordably. Its application process is similar to that of Funding Circle, and the funding timeline is just as quick as well. Though it only offers business funding, Lendio’s loan types expand wider than Funding Circle. Some of its products include equipment financing, business acquisition loans, startup loans, and even commercial mortgages.
Lendio stands out among its competitors for its loan amount and term options, as well. Since it offers so many loan types, it can offer as little as $5,000 for a startup loan or as much as $5 million. For businesses that need to purchase real estate, this makes Lendio a great option. Lendio’s term periods vary based on the type of loan you’re receiving, but in some cases, it can be up to 25 years.
FAQs
Is it safe to borrow from Funding Circle?
You don’t need to be afraid of peer-to-peer lending platforms. Funding Circle, in particular, has been BBB accredited since 2013 and currently holds an A+ rating. A quick look at Funding Circle’s Trustpilot reviews can also boost your confidence in using this lending platform.
Does my business have to be a certain size to get a loan?
Funding Circle does have requirements, but there aren’t many restrictions when it comes to how small or large your business can be. There is no minimum annual revenue requirement, but when in the underwriting process, Funding Circle will evaluate your business’s creditworthiness.
Are the loans secured or unsecured?
Funding Circle loans are secured, and as such, require a lien on your business assets as well as a personal guarantee from the primary business owner.
Use Quicken Loans to Get a Personal Loan
- If you're tight on cash right now, you may want to consider getting a personal loan. A personal loan is a loan that you can use for just about any purpose like: paying off other debt, renovating your home, or family needs like a wedding or adoption.
- TrustPilot Rating 4.6 out of 5
- Connect with lenders for $0
- 100% online experience.
The bottom line
Funding Circle is a peer-to-peer lending service that provides an alternative to bank loans to small businesses in the U.K., U.S., Germany, and the Netherlands. It offers a range of small business loan and funding options, including an SBA loan option. The application process is straightforward and doesn’t take much time. As an online lender, the funding process seems to be quicker than what other lenders may offer.
Funding Circle is one of many in the peer-to-peer lending space. While this company only offers small business loans, some of its competitors offer personal loans and other loans or services. Startups are not eligible for Funding Circle loans, so if you’re looking for startup funding, you’ll need to go elsewhere. Funding Circle may be just what you’re looking for for qualified established businesses.
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Writer
Ashley Hart is a lead copywriter and digital marketing expert covering finance, law, real estate, music, entertainment, health and wellness.
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