Budget & Saving

Imported item 389

Consumers have lent more than £1 million to small businesses following the launch of an online lending marketplace 10 week ago.

Since its inception in August, more than 1,600 people have used Funding Circle, with its creators believing that the success of the site is due to consumers' desire to earn higher rates of interest and increased demand for finance for smaller businesses.

The typical investor lends £2,000 to a small business, earning average annual interest of 8.2% on their money, but consumers can determine the level of interest they wish to charge, with lower rates understandably more popular with customers.

Although social lending sites are not a new phenomenon, Funding Circle is unique because lenders can also get all their money back before the end of the loan term by selling on parts of their loan to other lenders.

Each lender provides only a fraction of the overall loan that a business requires, with a company's credit rating assessed by the site's underwriters.

Companies are split into different risk bands to give potential lenders a clear indication of the level of risk they pose, although all firms have fully repaid their debt on time since the site opened.

Sam Jackson

Money Dashboard

Subscribe for updates

Get the latest posts delivered right to your inbox

Success! Keep a look out in your inbox!
Oops! Something went wrong while submitting the form.