Funding Circle Review: Small Business Loans, Rates & Fees Explained

Quite different from regular small business loan companies, who may issue funds from a central repository (like a bank), Funding Circle is a peer-to-peer (P2P) lending platform, which means that investors pay money into a pot and earn an annual return when others borrow from it.

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    Financially Reviewed by Gordon Scott

    In this Funding Circle review, we’re taking a deep dive into peer-to-peer (P2P) lending, how it works, and why the platform has become so popular. Funding Circle itself has been around since 2010 and more than 90,000 banks, retail investors, and asset management companies have invested $15.2 billion into 100,000 small businesses. The company was founded with the mission of giving small businesses that have been rejected by banks a safe place to borrow money. 

    What Is Funding Circle?

    A Funding Circle Loan is a little different from those you’ll find at traditional banks. As a P2P lender, you’re instead connected directly to investors that you’ll be repaying the loan to, while Funding Circle will underwrite the loans and approve any applications. Rates are pretty competitive here, ranging between 4.99%-27.99% and you can borrow up to $500,000. 

    The applications themselves are pretty flexible as Funding Circle is on a mission to help out small businesses. This means you’ll be assessed on much more than just your credit score, making the process a little easier. 

    Advantages and Disadvantages of a Funding Circle Business Loan

    Advantages

    • Competitive rates - Interest rates are between 4.99%-27.99% which beats a lot of traditional lenders
    • No minimum revenue requirement - You don’t need to prove a minimum income, and you have a lot more flexibility when being approved for a Funding Circle Loan
    • Dedicated account manager - Customer service doesn’t stop once you’ve got your funding. You’ll have access to experts through the lifetime of your loan
    • Available in 49 states - You can borrow in every state apart from Nevada
    • Few restrictions to your loan purpose - You can use your funding for just about anything you’d like, barring several prohibited industries like gambling, nonprofits, and speculative real estate

    Disadvantages

    • High origination fees - Origination fees range between 3.49% and 6.99% of your total loan value, which is a little steep
    • Startups aren’t accepted - You’ll need to have been in business at least two years to qualify, meaning there are no startup loans to be found

    Funding Circle Loan Features

    All investors are welcome to join the platform and lend money to various businesses at different levels of risk. You’ll find a lot of banks, large financial institutions and angel investors alongside regular retail investors looking for a good return on their savings. 

    For borrowers, the loan features will largely be dependent on your credit score, and how much risk the investors have chosen to shoulder. There are five types of loans on offer, and we’ve outlined some average rates and terms below, but those with lower credit scores can expect higher rates and shorter borrowing periods. 

    SBA Loan

    This loan is actually guaranteed by the government, and you won’t be borrowing the money directly from Funding Circle. These types of loan generally have more lenient eligibility requirements

    Loan Type

    SBA

    Term Length

    Up to 10 years

    Repayment Period

    Usually monthly

    APR Range

    Prime rate plus 2.75% (the time of writing the prime rate is 6%, so a total of 8.75%)

    Min-Max Amount

    $25,000 to $500,000

    Small Business Loan

    A fairly standard offering and one of the most popular loan choices on offer.

    Loan Type

    Small Business Loan

    Term Length

    Up to 10 years

    Repayment Period

    Monthly

    APR Range

    4.99% - 27.99%

    Min-Max Amount

    $25,000 to $500,000

    Line of Credit

    Lines of credit are a really flexible loan type that allows you to borrow from a designated borrowing limit and only pay interest on the money you withdraw. Think of it as a credit card with much higher borrowing limits. Plus, these types of loans can usually be approved much more quickly than other types of lending. 

    Loan Type

    Line of Credit

    Term Length

    No limits disclosed

    Repayment Period

    Daily, weekly or monthly

    APR Range

    Starting from 4.8%

    Plus a 1.6% - 2.5% withdraw fee

    Min-Max Amount

    $6,000 to $250,000

    Merchant Cash Advance

    A merchant cash advance involves borrowing against your expected credit and debit card sales. For the length of your loan, you’ll repay directly via your credit card sales, including any interest. 

    Loan Type

    Merchant Cash Advance

    Term Length

    3 - 18 months

    Repayment Period

    Monthly or weekly

    APR Range

    Factor rates from 1.15 (Equivalent to 15%)

    Min-Max Amount

    $5,000 to $450,000

    Invoice factoring

    Invoice factoring involves borrowing against any unpaid invoices. It’s a type of short-term borrowing to cover cash flow issues, and your loan is usually paid off once your clients have paid you the following month. These are usually pretty expensive and only recommended in a pinch. Funding Circle actually has very generous borrowing limits here and some pretty low rates though 

    Loan Type

    Invoice Factoring

    Term Length

    Usually one month

    Repayment Period

    Daily or weekly

    APR Range

    Starting from 0.25% per week

    Min-Max Amount

    Up to $5 million, or 90% of your outstanding invoices

    Funding Circle Interest Rates and Fees

    Fees and rates can vary considerably across each type of loan, and not everything will be disclosed until you apply. However, we’ve outlined what you can expect below.

    SBA Loan

    Loan Type

    SBA Loan

    Origination Fees

    3.49% - 6.99%

    Prepayment Fees

    None

    Late Payment Fees

    5% charge for payments more than seven days overdue

    Maintenance Fees

    1% annually

    Interest Rates

    4.99% - 27.99%

    Small business Loan

    Loan Type

    Small business loan

    Origination Fees

    3.49% - 6.99%

    Prepayment Fees

    None

    Late Payment Fees

    5% charge for payments more than seven days overdue

    Maintenance Fees

    1% annually

    Interest Rates

    From 4.8%

    Plus 1.6% - 2.5% charge for every withdrawal

    Line of Credit

    Loan Type

    Line of Credit

    Origination Fees

    3.49% - 6.99%

    Prepayment Fees

    None

    Late Payment Fees

    5% charge for payments more than seven days overdue

    Maintenance Fees

    $20 annual fee

    Interest Rates

    From 4.8%

    Plus 1.6% - 2.5% charge for every withdrawal

    Merchant Cash Advance

    Loan Type

    Merchant cash advance

    Origination Fees

    3.49% - 6.99%

    Prepayment Fees

    None

    Late Payment Fees

    5% charge for payments more than seven days overdue

    Maintenance Fees

    Not disclosed

    Interest Rates

    Factor rates from 1.15

    Invoice Factoring

    Loan Type

    Invoice factoring

    Origination Fees

    3.49% - 6.99%

    Prepayment Fees

    None

    Late Payment Fees

    5% charge for payments more than seven days overdue

    Maintenance Fees

    Not disclosed

    Interest Rates

    Starting from 0.25% per week

    How to Qualify for a Funding Circle Loan 

    A Funding Circle loan requires you to have been in business for at least two years, have a credit rating of at least 660, and have no bankruptcies on your record within the last seven years. In addition, residents of Nevada won’t be able to apply as the state has very strict P2P lending laws. 

    Outside of these restrictions, Funding Circle is actually very flexible. It’ll consider different sources of income, tax returns, company reviews, and your business’s reputation, to name a few. No other minimum criteria are stated, so we recommend getting in touch directly if you have any questions. 

    However, the platform does state that its average customer tends to have a turnover of $1.14 million per year and has around 12 employees, which can be used as a useful benchmark for applicants. 

    The Funding Circle Application Process

    Funding Circle states very specifically that an online application should take no more than six minutes, and approval decisions can come as quickly as one business day. Funding is usually received five to 10 business days after this.

    This is of course dependent on how complicated your case is and whether you submit the correct documentation. As well as undergoing a review by your case manager, Funding Circle uses high-tech algorithms to assess eligibility. 

    You’ll only need to submit basic information to start the application, but you may be asked for additional documentation, such as:

    • Company details, including your business tax ID
    • Names of any shareholders that own at least 20% of the company
    • Your social security number
    • Photo ID
    • Two most recent years of tax returns
    • One year of your personal tax returns
    • Six months’ worth of business bank account statements

    How Does Funding Circle Determine the Loan Amount?

    Everything here is based on how much risk the investors are willing to take on. If you’ve got a pretty high-risk venture to propose, your application will likely come with a high interest rate and shorter repayment terms in order to guarantee your investors make some kind of return. Outside of this, your previous business performance, general financial health and business plan will all help in determining your final offer. 

    Funding Circle is at the forefront of innovation in the lending industry and recently won an award from the Center for Financial Professionals for its contributions to FinTech. In addition, the platform can stake claim to creating more than 135,000 sustainable jobs throughout 2020, quite an impressive feat during a global pandemic. Funding Circle takes great care to review every application that comes through its doors, meaning those that do get accepted have a much higher chance of maintaining a successful business.

    Customer Support

    On top of the phone and email support, you’ll have access to your own dedicated account manager. They can talk you through the application process, explain the best ways to get accepted, and deal with any payment issues you might have throughout the life of your loan. This is a great personal service and it’s not common to see this at other online lenders. 

    Funding Circle Loan Reviews

    Funding Circle loans have a very respectable score of 4.5 out of 5 stars on both TrustPilot and MerchantMaverick. Customers are particularly impressed with the constructive and helpful support provided by the customer service team, and just how easy the application process is to get to grips with. The service is incredibly personalized too, with individual loan officers able to guide you through every step of an application. 

    Some customers have been a little shocked by the sometimes high origination fees, while others feel that withdrawal fees on lines of credit are a little steep too. Funding Circle makes every effort to respond to each piece of criticism individually and it welcomes any direct feedback via its website and customer service team. 

    Positive Reviews

    Negative Reviews

    Excellent customer service

    High origination fees

    Fast application process

    Expensive withdrawal fees

    Clear guidance on loan types

    Poor responses to emails

    Fast turnaround times on funding

    Some slow service on complex applications

    Final Thoughts

    The flexible loan options, generous terms, high funding limits, and low interest rates all make Funding Circle a great choice for a small business loan. Combine this with a smooth application process and excellent customer support and you can rest easy knowing your borrowing needs will be well taken care of. Plus, the wide range of different loan types affords a high degree of flexibility. 

    However, if you’ve got bad credit, are a new startup, or simply don’t have enough business experience, you'll likely need to try another provider. You might want to try a bad credit lender or try borrowing at lower amounts at other platforms until you can build your score up.