Funding Circle Review
4thWay's Quick Expert Funding Circle Review
A very strong history, although with recent signs for caution
Funding Circle has a history measured in billions of pounds of loans stretching back to 2010, and highly experienced former bankers, underwriters and credit-risk experts, and it has demonstrated very satisfactory borrower selection processes.
Funding Circle has demonstrated that it understands and contains the risks when approving loans, and it has historically priced interest rates with what we believe has been a large margin of safety in the event of severe economic disasters.
Previously, we had praised Funding Circle's “great transparency”, which used to include “sharing the fine detailed history of each loan over time, which allows us to assess its performance using both bank risk modelling and investing techniques”.
However, Funding Circle recently withdrew this information, which leaves a big question mark over the future. In many ways, withdrawing data that it used to provide gives me more pause than if it had never allowed its users to see the data at all.
Without that data, Funding Circle is no longer able to earn 4thWay PLUS Ratings or 4thWay Risk Scores on its lending accounts.
Funding Circle has been losing money, but, in a new, growing industry most businesses are loss-making, so we must distinguish between those with “healthy” and unhealthy losses. This professional, established business, backed by strong investors that put in an extra £82 million in 2017, has been growing its sales rapidly and has a strong brand, which puts it firmly on the healthy side.
If you lend at least £2,000 you will lend across at least 200 borrowers, which is appropriate for these loans. It is not uncommon in these kinds of loans for a significant minority of lenders to see their lending returns take an early hit as bad debts arise, but over time the interest you earn and the recoveries on bad debts will prove sufficient for the vast majority of lenders, so a bit of patience is required.
Visit Funding Circle.
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