Funding circle - too good to be true?

Funding circle - too good to be true?

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My client is in a bit of dire straits cash-wise.

I mentioned Funding Circle on the basis that if some of my z-list clients could get money then anyone could.  Lo and behold this client - not a z-lister at all (in case she finds this question!! x) has been offered over 50K based on a few questions and sending over accounts which don't really help the company's repaying ability.

Client worried - too good to be true. and TBH I have my misgivings about Funding Circle and it's "oh we're government backed" mantra. Is this the future subprime hole building up. The 50K will be "secured" only by personal guarantees of the two directors.

Anyone have any experience/comment/similar concern?

Replies (9)

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By ireallyshouldknowthisbut
18th May 2017 16:46

As an occasional investor, yes its real. I must admit i am thinking of winding back out of it as some of the dross that goes up now is unbelievable, and as you say there seems to be virtually no checking of the company, and often they go "Pop" 3 months after the borrowing has been made. That said I have made a 10% (per annum) return on lending over the past 3 years but it does leave me nervous sometimes.

But from your clients point of view, they will get their cash.

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By Duggimon
19th May 2017 09:41

I'd agree, I've got a few clients who are using or have used them and while there may be concerns for investors putting their money in, as a borrower there's no real reason to worry so long as they're happy with the terms.

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By ksagroup
19th May 2017 10:16

Funding Circle are lending to businesses like crazy! If the directors are happy with personally guaranteeing the loan then fine but funding circle will go after them big time if they can't pay. But loans are possibly just treating the symptoms and not the cause!

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Replying to ksagroup:
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By HeavyMetalMike
19th May 2017 10:45

Thank you all.
Re Pers Guar.....one of the directors is going to emigrate soon and before the company loan is paid off. There is no intention to default (the company has plans to cease, liquidate, realise gain on land etc).
But I guess I can just tell my client to go for it. Without being a lawyer.

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Replying to HeavyMetalMike:
Red Leader
By Red Leader
19th May 2017 11:24

What interest rate will your clients have to pay?

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Replying to Red Leader:
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By HeavyMetalMike
19th May 2017 11:41

circa 3%.
1048 * 60 months for 52K

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Replying to HeavyMetalMike:
Red Leader
By Red Leader
19th May 2017 14:54

Actually that works out at 9.8%. Still, seems like a good rate if no other options.
As they are offering PG's, maybe adding to the mortgage would be cheaper and with same risk for borrower?

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paddle steamer
By DJKL
19th May 2017 12:05

I played around with it as a lender with a few thousand pounds for a period, it was hard work buying the required diversity, I got hit with two bad debts and whilst the interest on the others covered the losses the return was really not worth all the effort. maybe I was unlucky or did not persevere long enough. Has been discussed at work as we are sitting with reasonably large sums on deposit with the bank earning virtually nothing.

I think the screening was iffy and to me it was interesting that the types of business seeking funds seems to come in clusters,I actually for a period had a fair few accountancy practices I lent to (about 10), maybe some of you. (They did not default I hasten to add)

Was less keen on solicitors as borrowers, some seemed to have concentrated business models which legislative changes could scupper, the summaries provided were never enough so one always had to dive into websites etc.

Re subprime issue you postulate, if the borrowings being made got longer term , a large book being built, then I might share your misgivings, longer term festering debt being bought and sold could be an issue, but when I was a lender the loans rarely went over three year term, so they wash themselves clean and the amount of toxic waste is possibly limited, also contagion risk is less.

What I could see is a PPI scandal;

"I didn't know what I was doing when I borrowed, you the lender should have protected me from myself you are at fault that my business went bust, by lending me the money and assisting my expansion you caused my downfall etc etc etc"

Still it will be good for the niche solicitors , another bandwagon.

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By Michaelfking
27th May 2017 19:01

There are various different models now appearing. At Accountex, there was a company promoting FloFunder www.flofunder.com which they say is a different business model aimed to ensure that the accountant is at the centre and provide a service for their eco system of clients, irrespective of size, to join to sell or finance invoices within a closed operating environment at a lower entry point and cost than currently available.

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