Funding Circle have announced that the UK government have started to lend through Funding Circle as of today.
Here is their full statement, repeated on the Funding Circle forum:
Today, we’re pleased to confirm that the process with the Department for Business Innovation and Skills (BIS) has been completed, contracts have been signed and from Monday 25th March, the Government will start lending.
Before this begins, however, we wanted to update you all on how this will work and why we believe Government involvement will increase awareness of Funding Circle in the business community and consequently provide more lending opportunities for investors.
How will lending work?
From Monday, the Government will start lending to all businesses which meet their criteria (more details on this are available in our FAQs). They will fund each loan at a set amount which will be fixed at any point of time.
This will start at 20% of the total loan amount, as shown in the picture below, and will decrease over time as the £20 million runs down and the value of loans being accepted through Funding Circle increases.
The remaining 80% of a loan will be funded in the normal way and your lending experience will stay the same. Once a loan closes, the Government will fund the 20% at the average interest rate of all successful bids on that specific loan.
The Government will only take part in new loan requests and will not purchase any loan parts from existing investors.
Will this affect opportunities to lend?
Since the Government first announced plans to lend through Funding Circle we have seen an upsurge in interest from businesses. Many businesses have told us that this is directly as a result of the Government news.
Interest from businesses has particularly picked up over the last two months. As result, in the last 30 days there have been more opportunities to lend than ever before with £10m being lent to more than 170 different companies. The Government’s involvement will also allow us to list larger loans on to the marketplace and as such we have increased the upper loan limit to £1 million.
There is approximately £7 billion of lending to businesses every month in the UK, so the opportunities remain significant. We will be working hard over the coming months and focusing our efforts on attracting more businesses to join Funding Circle.
Demand for loans through Funding Circle has recently increased and caught up with the additional supply that had suppressed returns to lenders. While 20% may seem a large figure, demand is growing at tripple digits per annum, so this should not have a major impact to lenders in the medium term. With the additional press coverage, and the increase in the maximum loan to £1M, this should bring in additional borrowers.
The P2P money website picked up on a tweet from BusinessZone.co.uk that Camden Council and 10 others and are to fund small and medium enterprises through Funding Circle. It was back in November 2012 when the P2P money website reported that Lancashire Council had teamed up with Funding Circle to do the very same.
At a time when businesses are finding it difficult to obtain funding, it is encouraging to see councils supporting this sector, which is one of the very few providing any growth in financial services.
The first quarter of 2013 has brought no less than four new entrants to the P2P market, and there are at least two more companies preparing to launch. These new entrants are Mayfair Bridging who specialize in bridging loans, Folk2Folk who specialize in commercial and buy-to-let mortgages, Assetz Capital who specialize in loans to small and medium enterprises and Funding Secured who specialize in secured lending to businesses. The two companies still in the pre-launch phase are CivilisedMoney and Lend Loan Invest, who we have mentioned previously.
From the lender's perspective, Mayfair Bridging, Folk2Folk and Funding Secured are all targeting the higher net worth individuals, whereas Assetz Capital, Civilised Money and Lend Loan Invest are targeting the "retail lender" with minimum loan amounts in the tens of pounds rather than the tens of thousands of pounds.
This is proving to be an exciting year for peer-to-peer lending with an industry that is growing at a huge rate compared with the economy as a whole.
Funding Circle have passed another milestone by arranging a total of £80million in peer-to-business loans. It was back in September 2012 when they broke the £50million mark. Back then we calculated they were growing at a phenomenal 240% per annum. We can now revise down this growth to 160% per annum, but this is still an amazing figure given the economical climate.
We can also publish that also in the last 5 months the peer-to-peer industry in the UK was growing at a rate of 90% per annum (this figure is based upon outstanding loan capital between September 2012 and February 2013). This must be the one growth market within the financial services sector.
A new peer-to-peer company, Folk2Folk, has launched that offers secured loans on non-residential property to individuals and businesses in the South West (Cornwall and West Devon). They are targetting individuals who are able to lend £25,000 and above (which matches Mayfair Bridging who offer short term bridging loans).
Some examples of loans could be for:
- Residential Buy to Let
- Holiday Homes
- Commercial or industrial premises
- Agricultural land
Here is a copy of their statement on their newsroom:
February sees the launch of Folk2Folk, a peer-to-peer platform that has been set up by the partners of a long established law firm in Cornwall. Folk2Folk provides local, fast secured lending by putting those that wish to lend and obtain a decent return in touch with those that wish to borrow on flexible interest only terms.
Folk2Folk can provide access to finance within seven to ten days provided borrowers can provide suitable security in the way of a first legal charge over property (other than a borrower’s home).
Unlike other peer-to-peer platforms, Folk2Folk is asking for minimum sums of £25,000 (no maximum amount) from investors/lenders. Lenders seem very happy to advance significant funds on the basis that their investment is protected by a first ranking legal charge.
As with other peer-to-peer lending platforms, borrowers have been very carefully selected and Folk2Folk is taking steps to verify that borrowers’ properties are suitable security.
Where banks may take months to process a secured loan, Folk2Folk can turn this around within seven to ten days.
Interestingly, Folk2Folk also offers “a local touch” in both having premises (as well as a full web platform) and drawing upon a significant amount of local knowledge as part of their vetting process.
For investors interested in this secured lending platform or for borrowers who are able to put forward suitable property and wish to obtain fast and flexible borrowing, please visit www.folk-folk.com where more details can be found.
We will be adding Folk2Folk to the list of peer-to-peer companies as soon as we can.