There will many who are better qualified than I to comment on the technical aspects of Funding Circle.

I have made a small investment to get the feel of it.

Their quoted average yield is 8.3%, which seems to be about right to me. Of course, they take 1% off of that, and then one must pay tax on the remaining income. So for a normal rate taxpayer, the final yield is in the 5% range. One bone of contention is that you don't get any tax relief for any losses on loans you make. The loans are for either 12 or 36 months. Obviously one must take a view on fixing the interest rate for 3 years at a time.

The actual lending process is pretty easy, and the website explains it pretty well. There are obviously ways of timing of bids to try and get the maximum yield and so on. There is an auto-bid process which works OK. One can also buy existing loan-parts from other lenders.

The site seems pretty well run. Interestingly, they have said that they do not wish to run a site-forum at the moment; which is at least honest, if unusual for a social funding site.

One point of concern for me personally is the very poor amount of information provided by many of the borrowers. Not to mention the terrible spelling and grammar used. {That dates me ...}

One or two general sentences seem often to suffice. Almost at random: "What Is The Loan For? Working capital and to replace a previous bank stocking loan,now full [sic] repaid". Or another:- "What Is The Loan For? To grow the business".

Short financial reports are available; and lenders can ask questions about them which are published. The trouble here is that sometimes the figures are not accurate for some reason. Or for instance, a loss is shown for previous years - and no explanation is given for why a profit may be forthcoming. Finally, the current year's figures are given, but there's no indication of what dates they cover; until a member of the Funding Circle staff later posts a discussion point to say what those dates are.

I think I read that most of the loan requests to Funding Circle are refused before they are offered out on the site. So, in view of the poor (IMHO) information given to the lenders, one has to have a lot of faith in the underwriting and review procedure. To be fair, there has only been one default so far in a grand total of 210 loans - but on the other hand, most of the loans are just months old.

So, mixed feelings. The site seems to be well run, and the information about how much you've lent, and when payments are made and so on, seems to be fine. I would be much happier with a more professional feel to the public lending process.

With apologies to Citywire, there is a transcript of an interview with a director of Funding Circle here:- http://www.fool.co.uk/ne...way-to-borrow-money.aspx

It seems inherently risky. You cannot know what you are investing in as the company only provides the minimal information it wishes to provide. Further they are only coming to the website because they have been unable to get funding through conventional avenues (ie they are a bad credit risk).

I've been an active lender on Funding Circle since November 2010, and have had a very good experience with them so far. My yield is currently 9.2% and on an upward trend as earlier loans (made when "going rates" were generally lower in late 2010 than they have been recently) are gradually repaid. I value the flexibility of the system in terms of getting money out - recently I felt overexposed to a particular borrower so placed some loan parts for sale. They were all sold within a couple of hours. In any event lenders receive monthly repayments of principal and interest from each borrower - money is not all tied up for the loan period.

I value the fact that borrowers are carefully scrutinised before being accepted (or not) onto the site, but one is of course placing faith in the underwriters as there is limited financial information visible to lenders. However, many (most?) are limited companies so that further information is in the public domain if a lender wishes to do further due diligence. I agree that it would be better all round if borrowers' pitches were standardised and quality-controlled as some are indeed poorly written and lacking in detail. As a lender one has a choice about whether to lend and if so to whom, and I for one favour borrowers whose pitches are well thought-out and whose reasons for seeking the loan are compelling. I certainly don't agree with the suggestion that borrowers must be a bad credit risk in order to be seeking FC loans; the key issue for borrowers is not being refused loans but the rates that traditional lenders are seeking from them. Cutting out the middle man achieves a better deal on both sides of the loan

Obviously there is inherent risk of default. Diversification is key. The guidance given to lenders is not to lend more than 5% to any one borrower, though I prefer to be more diversified (max about 3-4%). In the event of default of a borrower, capital losses can be offset against chargeable gains in the relevant year or carried forward. There's been one default (stats on loans and their status are openly available on the FC website).

Now is a good time to be investing on FC as they've got lots of borrowers in the pipeline so are offering lender incentives (including 1.5% cashback on all new funds lent, for a limited period) which boost the true yield. They are also (today I think) migrating the website to a new hosting provider so that it doesn't grind to a halt at busy times.

Generally I am very happy with them and my money is working much harder in the right direction than my share portfolio has been doing lately. For me the key improvements I hope to see in the future are (1) tax efficiency - the ability to hold the investment in an ISA wrapper, and (2) an Android app.

I've been lending via Funding Circle for over a year now. I'm very happy with the return which I've now built up to over 9%. Net of the 1% charge it's still comfortablly above deposit rates. Clearly there is more risk but in my view it's a very good return compared to the alternatives in the current market.
If the account is opened by a non tax payer and annual interest is below the personal allowance, there is no tax to pay.
Every loan application is risk rated from A+ (lowest) to C (highest) but I understand even C rated loans are below average in terms credit risk compared to all UK businesses - the default rates to date seem to support this

I think this is a great way for businesses to secure finance when banks are reluctant to lend, however new businesses are left out in the cold. How do we expect to get out of recession when there is no support for new start-up businesses.

Out of 42 loan parts I have 3 that have been downgraded and 1 in loss, not impressed at all, will let all loans mature and put the funds to work elsewhere.

i am regular user of F-Circle
got get my saving working , not sitting in B-S or bank with pittance low interest rates.

like Clive B i been lending since summer 2010
and liked the concept of helping our small business THE big banks should be doing THIS
. In 2010 there was barely £10million loan out to small business ,now it over 30million. There are other peer-2-peer lender out there and growing - in time the Big Banks will have serious compitition.

but F-Circle were i put my money . Unlike Zopa , F-Circle is there to help lend to small to larger business rather than individuals.

-1. i can sell all or parts of any loan if i need the money quickly
-2. Start Ups cant apply - higher risk of defaulting .
-3. i like web page layout - user friendly without being too complex.
-4. u get a see the Business Profile, Credit Score , Financial Summary of last 2yrs and U can ask borrower questions .

my Financial Advisor was impress with my Average rate of return of 9.5% before tax and other fee

Iam glad i not put it in today volatile stock market .

i think they are clueless

i gave them two cases just to see how they performed.

CASE 1

company owned commerical building 40% ltv, good turnover used money in the company for a desposit .

won a big contract need a short term injection of cash for cash flow. very simple. very safe

never needed an overdraft

perfect

5 weeks to make a decision
CASE 2

company in problems, needed money to fund projects , no fixed assets, high over draft.

very high risk

two weeks

They gave 100k company 2 who went into admin, nine months later. Company 1 still going strong, increased profits agains , got funds from funds from the bank in the end

After completed

Asked them to explain after company 1 seem a much safer option, clueless .

told them company 1 could obtain funding from the bank , company 2 couldn,t

Never would use them to invest or borrow from again.

CLUELESS

Hi Joanne

and how do we know you're not really a guy somewhere in Nigeria (unfortunately the origin of many scams) ?

According to today's FT, FC have just received £10m from American Venture Capitalists. Which might well be the kiss of death :-)
Funding Circle Raises Funds