Funding Circle Innovative Finance ISA
Funding Circle’s Innovative Finance ISA is now in play. You’ll be able to earn an estimated maximum of 7 per cent of tax-free income through this product.
Funding Circle’s rates are typically dependant on the loan’s term and risk band.
The company states that every business listed on its marketplace has passed its “rigorous credit assessment process” using a mix of risk tools to understand the borrower’s financial health. These tools include statistical credit models which rank potential borrowers by order of risk, manual credit assessments, loanbook assessments in preparation for an economic downturn, policy criteria and historical data.
Funding Circle doesn’t hold bad debt provision (or a reserve fund as some might call it) in the event of default, business failure etc. However, do note that platforms that do hold a reserve fund, may also hold a higher level of risk, potentially levelling out the playing field.
Whilst you can hand-pick loans on Funding Circle’s marketplace, by selecting its autobid tool, Funding Circle will automatically lend for you. In the tool’s advanced settings, you can also choose which risk bands you specifically want to lend into.
You can sell your ‘loan parts’ to other investors using Funding Circle’s autosale tool which automatically chooses which loan parts make up the value of money you’d like to access. Once you’ve reviewed and approved the selection, these parts are put up for sale, whereby other lenders can decide whether or not they’d like to buy them.
There’s also the option of individually picking the loan parts you wish to sell, and selling them at up to a 3 per cent premium or discount. Selling at a premium means you can earn a profit, whilst selling at a discount mean the rate would be more attractive to buyers, thus helping parts sell quicker.
The platform is accessible on desktop and via an iOS app. For the products it currently offers, there’s any easy to read layout to help you keep a track of the loans you’re bidding on, the businesses you’re lending to, your interest earned to date and so forth. The tools are straightforward and simple to access.
This ISA could be of interest to those looking to invest in UK business – especially because of Funding Circle’s established status, and the large and varied amount of options available to lend to.
Updated: Wednesday, November 28th, 2018