Funding Circle Review
- Term loans
- Franchise financing
- Fast time to funding
- Competitive interest rate
- No prepayment penalty
- Transparent advertising
- Excellent customer service
Funding Circle is an online lender which offers mid-length term loans to established small- and mid-sized businesses.
The company was established after one of the founders started a gym franchise and discovered how expensive non-bank loans can be. Deciding he could do better, he and a partner founded Funding Circle in the UK. Later, the company merged with US-based company Endurance Lending Network to establish a presence in the United States.
This review will only cover the US branch of Funding Circle’s service.
Unlike other lenders that offer similar rates and terms, Funding Circle does not target merchants who aren’t quite large or well-established enough to get a bank loan. Their customers tend to be businesses who could otherwise qualify for a bank loan. After all, many of their customers are (unsurprisingly) franchisees, a type of customer who often has an easier time accessing funds because they’re backed by a tried-and-true brand.
Funding Circle’s selling point? At 10 days or less from application to funding, Funding Circles loans are much faster and easier to obtain than those from a bank.
Unfortunately, Funding Circle’s qualifications are prohibitive to startups or less established businesses. To get a loan from this lender, you’re going to need at least two years in business, an annual revenue of at least $150K, and a credit score of 620 or more.
However, if you qualify for a Funding Circle loan, this company is definitely worth investigating. I can’t recommend them over a bank loan, since the latter will inevitably be able to give you better rates. But if you don’t have the time, the inclination, or the option of getting a bank loan, Funding Circle offers solid rates and fast service.
Want to learn more? Read on for the details!
Funding Circle offers mid-length term loans.
To qualify for a loan from Funding Circle, your business must meet these requirements:
|Time in business:||2 years|
In addition to the above, your business cannot have a history of bankruptcies in the last 7 years, or tax liens in the last 10.
Terms and Fees
These are the numbers listed on Funding Circle’s website:
|Borrowing amount:||$25K – $500K|
|Term length:||1 – 5 years|
|Interest rate:||5.49% – 27.79%|
|Origination fee:||0.99% – 5.99%|
|APR:||Approx. 7% – 33%|
|Collateral:||Personal guarantee, lien on business assets|
Your interest rate is determined by how much risk you pose to Funding Circle’s investors. To determine how risky you are, they look at factors such as your credit score, the type of business you run, the age of your business, and how long you want to borrow the funds.
Aside from an origination fee and interest, the only fees you might be charged are fees for late payments and insufficient funds. This lender does not charge a fee for repaying your loan early.
It’s important to note that in the past, a borrower’s interest rate was determined by the investors in an auction model. However, as of September 2015, Funding Circle has switched to a fixed interest rate model. Now, Funding Circle chooses an interest rate for each borrower before the deal goes to auction. I am all for this change, as it means borrowers know their rates before their loan goes to funding, which makes comparisons easier.
To begin the application process, you need to get “pre-qualified” for a loan, a word which here means, “see if your business meets Funding Circles minimum qualifications for funding.”.
Assuming your business is approved, you’ll have to fill out a more detailed form about yourself and your business, and information about why you want a loan. When you complete this step, you’ll be provided with an estimated interest rate. You’ll also be given a list of documents that you’ll need to upload before getting a final offer.
These are the documents Funding Circle will ask for, according to the FAQ:
For loans under $200K:
- 2 years (most recent) business tax returns
- 1 year (most recent) personal tax return (including W-2s)
- 6 months (most recent) business bank statements
Additional documents for loans above $200K:
- YTD balance sheet and income statement
- Outstanding Business Loans & Credit Worksheet
Additionally, after you’ve completed the application, a representative from Funding Circle will call to discuss your business and your loan options.
Once you’ve had your consultation and uploaded all the documents that Funding Circle requires, your application will go through underwriting. After a few days, they’ll get back to you with a loan offer, which will include your interest rate and origination fee. If you accept, your loan will be put up for funding and the money will be available in your bank account within a few business days.
According to the website, Funding Circle claims that the time from application to funding takes 10 days or less.
Sales and Advertising Transparency
I love P2P lenders because they tend to be very transparent regarding rates and fees. Funding Circle is no different. I do wish they’d post their minimum qualifications somewhere, but otherwise Funding Circle posts everything you need to know. This includes interest rates, origination fee, potential fees, and other loan details.
Customer Service and Technical Support
Potential borrowers have to talk to a loan specialist at least once before accepting a loan from Funding Circle, so support is an important subject.
Considering I haven’t read a single complaint about their customer service, Funding Circle does well in this category. You are assigned a single loan specialist for the life of your loan. The specialists are interested in understanding your business’s situation and ensuring that you understand the terms and conditions of the loan, which I always like to see.
Bonus: they’ll help you understand competing loans as well, whether that’s by helping you calculate the APR or explaining how the loans work. It helps that difficult-to-understand loans generally have terrible, terrible rates compared to P2P loans.
Customer service is available Mon-Fri, 8 AM to 8 PM PT.
Negative Reviews and Complaints
Funding Circle has an excellent track record on the Better Business Bureau, with an A+ rating and only five complaints in the past three years. Four of those complaints—and this will never cease to amuse me—are about Funding Circle’s extremely obnoxious mailers.
Mailers aside, I appreciate that Funding Circle takes the time to respond to all negative complaints, clear up any confusion, and genuinely apologize for mistakes on their part. That’s not something you always see from these types of services. For examples, check out their TrustPilot page.
Here are the most common complaints I’ve seen about this lender:
- Not for startups: For reasons I do not understand, Funding Circle does not post their minimum requirements on their website. If you’re running a startup, don’t bother applying. Funding Circle only loans to well established businesses with a minimum of 2 years in operation.
- Long application process: Funding Circle requires you to provide more information than would for, say, a merchant cash advance or a short term loan. While having a longer, more detailed application might be an annoyance to some merchants, rest easy knowing that the more detailed the application, the better rates you’re likely to get.
- Monthly repayment due date: Some borrowers are surprised when their first payment rolls around earlier than expected. Due dates land on the day the loan was accepted, not the day you get the funds. Unfortunately, you cannot currently change the monthly due date.
Positive Reviews and Testimonials
Look no farther than Funding Circle’s TrustPilot page for positive reviews of this company. Customers praise all the usual marketplace lender characteristics including:
- Fast time to funding
- Easy application process
- Quality customer service
Perhaps because Funding Circle’s customers are predominantly owners of well-established businesses, the reviewers are especially happy that these loans are much easier to obtain than a bank loan. While the application process is long compared to other alternative sources of capital, it’s significantly shorter than you would see with a bank loan. The terms are more expensive than you’d be able to get from a bank, but many merchants are willing to accept the trade-off.
Because of the competitive interest rates and easy application process, Funding Circle is well worth investigating if your business meets their qualifications.
As always, I’d encourage you to make a few comparisons to ensure you’re accepting the best offer possible. However, the few complaints circulating the web regarding this company are not terribly worrying. The service is just about as transparent as you can get, and Funding Circle expresses an interest in clearing up any confusion or complaints voiced by their customers. Unless you get a better offer, Funding Circle is an excellent choice.