Getting started as an investor.

Transcription

1 Getting started as an investor.

2 Welcome to Funding Circle You ve just joined thousands of other people who are earning a great return by lending to British businesses. Your new account is now set up and we re here to help you get started. If you re the type of investor who loves to have full control, then we re sure you re going to love Funding Circle. Equally, if you don t have a lot of time to spend on your investment, we have some tools that will help you run things in a quick and hassle-free way. Use this guide to learn how to lend, fi nd your way around your account and more. Or, we can talk you through any area you re interested in simply call us on: (Monday Friday, 9am 5pm). In this guide, learn all about: 3 key facts to know before you get started 3 Your new investor account 4 How to lend: 6 - Hand-pick businesses to lend to 7 - Lend automatically with Autobid 10 Rates, fees and interest 12 Accessing your money: 13 - Sell your loan parts 13 - Withdrawing your money 13

3 Section 1-3 key facts 3 key facts to know before you get started. In this guide we ll take you through every aspect of lending, but before we get started, here are 3 essential facts for you to know: 1. Every new loan is funded through an auction process Every business loan request is run as a live auction, so that all investors can participate. As an investor, you participate by placing a bid. The bid is simply the amount of money you want to offer the business and the interest rate you set for them to pay you back. Just as with any auction, the bid is fi nal and can t be withdrawn but it can be knocked out by other investors offering lower rates. If this happens, you can bid again at a lower rate. 2. Investors hold loan parts At the end of the auction, if the business accepts the loan, all successful bids become loan parts. Each of the investors will hold loan parts ; a loan part is simply your share in the overall loan. For example, in a 50,000 loan which has been funded by hundreds of investors, one investor may hold 1 x loan part of 100 at a rate of 8.5%. Your loan parts are repaid in monthly instalments by the business, so you can continue re-investing these repayments to maximise your return. 3. Loan parts can be bought and sold As an investor you can also buy and sell loan parts if you want to. This happens under the loan parts (buy) or sell tab in your account. So, you are able to access your money when you need to, even before the loan is fully repaid. On average, it takes just 30 minutes to sell a loan part at par value. Equally, if you want to build up your portfolio of loan parts quickly, you can side-step the auction process and buy existing loan parts from other investors. 3

4 Section 2 - Your new account Your new investor account Account summary You can keep track of where your money is, interest earned to date, see which businesses you re lending to and much more in your account summary. Here is a full glossary of all the sections and what you can use them for: Summary How It Works Transfer Money Autobid Loan Requests You have of available funds, bid now. All time earnings summary Current Gross Yield 9.6% Earnings Fees 5.27 Losses 0.00 Net earnings My Loan Parts You are currently lending on 30 loans (43 loan parts) totalling 1, My Bids You are currently bidding on 5 business loan requests (5 bids) totalling My Statements View transaction statement View tax statement Recent Loan Comments There are comments for 1 loan you are currently exposed to. Fund summary Funding Circle total: Lent 1, Available funds Bid Accrued interest 3.39 Fund summary See the real-time update on your money, including amount in bids or lent out, and what s still available to lend. Any interest that is due to be paid in the next repayments is shown as accrued interest. All time earnings summary See total earnings (including interest, sale of loan parts to other investors, promotions) and any losses (due to business defaults). Click on the + icon in each row to see a full breakdown My Loan Parts See all the businesses you re lending to listed by business or individual loan part. My Bids See the summary of all your current bids on loan requests. Recent Loan Comments If a business you re lending to is late with its repayments, or has defaulted on their loan, we ll keep you updated here. My Statements Download your transaction history and tax statements here. Not sure what an auction, bid and loan parts are See the 3 essential facts at the start of this guide. 4

5 Section 2 - Your new account Using the tabs in your account There are 8 tabs across the top of your account which you can use to transfer money in and out of your account, lend, sell, and see the rates other investors have bid at. Summary How It Works Transfer Money Autobid Loan Requests Current Gross Yield 9.6% Here s a guide to what each tab does: You have of available funds, bid now. Fund summary Funding Circle total: Lent 1, Available funds All time earnings summary Further information on choosing businesses, lending, using Autobid, repayments, Earnings Bid accessing your money and more Fees 5.27 Accrued interest Losses Net earnings Use this tab to transfer money in and out of your account. You can transfer in using: My Loan Parts UK debit card immediate transfer You are currently lending on 30 loans Bank (43 loan transfer parts) totalling up 1, working days mary How It Works Transfer Money Autobid Loan Requests Loan P orks Transfer Money Autobid Loan Requests Loan Parts Sell My Bids You are currently bidding on 5 business Automatically loan requests lend (5 bids) your totalling money to many different businesses at your chosen rate with Autobid. r Money Autobid Loan Requests (For more information on how Autobid works, see the Lending: getting started section) My Statements View transaction statement View tax statement tobid Loan Requests Recent Loan Comments There are comments for 1 loan you are currently exposed to. equests See all live loan requests that are currently at auction in this tab. The table lists every business loan request and by clicking into the loan title, you can see the full details of the business. You can choose the businesses you want to lend to and place bids here See all existing loans (loan parts) that investors are selling here. You can review the list and choose loan parts to buy in order to quickly build up your lending portfolio and diversify your risk Need to sell some of your loan parts You can do this here: Automatically sell a set amount ( ) of your total lending Or, Select and sell individual loan parts Sell Statistics Want to know the average rates other investors are bidding at Or the current bad debt rate You can review Funding Circle s full history of activity, including lending rates, business defaults and more under this tab 5

6 Section 3 - How to lend: hand-picking businesses Lending: getting started As a Funding Circle investor, you can choose the method of lending that suits you best. Choose from two options: 1. Hand-picking Choose businesses to lend to based on specifi c information about that business. There is an extensive amount of information available to review, for example: Risk band Region Sector The business s fi nancials Reasons for the loan 2. Automatic lending Lend to a cross section of businesses automatically with Autobid. Autobid is a tool that will automatically lend your money to different businesses at the rate you set. It s a great time-saver for busy people. Quick fact: Only businesses that pass our credit assessment process can borrow through Funding Circle. Those that do pass the assessment stage are given a credit risk band to guide you on the relative strength of the businesses (and conversely, the level of risk that they may not be able to fully repay their loan). Risk bands range from A+ (strongest businesses which represent the lowest risk) through to C. If a business can t fully repay its loan, it becomes a bad debt. While this will happen with only a small percentage of businesses, it s important to review the level of bad debt you should expect per risk band before you start lending. We provide these estimates and regularly update them on our site. It s also important to learn about diversifi cation and the benefi ts of lending across lots of businesses to manage risk. To understand more about diversifi cation and bad debts, see the investor section and our blog on Lending: Hand-picking businesses This option suits investors who: Want to pick businesses based on a specifi c set of criteria Like to do their own independent assessment of the company s fi nancials Not sure which option suits you best Meet Rodney who hand-picks businesses to lend to, and Rhys, who uses Autobid. Rodney I prefer to choose the businesses myself as it means I can look through the fi nancials before placing my bids. Having invested in larger companies through stocks and shares, I like to know as much about a business before I start bidding. It also means I can keep an eye on what other investors are bidding and when I have the time, I like to wait for the last few minutes to place my bid which often means I can get a last minute bid away at a high rate, maximising my return. Rhys I have a wide portfolio of investments but I don t have a great deal of time, so Autobid suits me. As long as my money s spread out evenly across lots of businesses and I m earning my set 8.6%, I m happy. The best thing about Autobid for me is that it keeps reinvesting the re-payments I earn, so my money is never left dormant for a minute. 6

7 Section 3 - How to lend: hand-picking businesses 3 steps to lending: hand-picking businesses Step 1. Set your criteria Decide the criteria that s important to you in a business: for example, does it need to be in a specifi c risk band, from a certain region, sector You can also look for certain indicators of performance in the company s fi nancial details, the purpose of the loan or see what other investors are asking. All this information and more is available on each business loan. Step 2. Choose the businesses Find businesses that match your criteria in the loan requests or loan parts sections of your account. Loan requests: Choose from all businesses currently looking for a loan. Summary How It Works Transfer Money Autobid Loan Requests You have of available funds, bid now. All time earnings summary Fees Earnings Net earnings Current Gross Yield 9.6% Losses Fund summary Funding Circle total: Loan parts: Choose loan parts available to buy from other investors. Lent 1, Available funds Bid Accrued interest 3.39 My Loan Parts You are currently lending on 30 loans (43 loan parts) totalling 1, My Bids You are currently bidding on 5 business loan requests (5 bids) totalling My Statements View transaction statement View tax statement Recent Loan Comments There are comments for 1 loan you are currently exposed to. 7

8 Section 3 - How to lend: hand-picking businesses Step 3. Bid / Buy Summary How It Works Transfer Money Autobid Loan Requests Refurb to Garage and Offices Expansion/growth Capital (1605) add to watch list Key information Business profile Credit Score Financial Summary Questions & Answers Repayments 95,000 Rate: 8.4% Borrowers details 100% Funded. Borrowers name A British manufacturing firm Borrowers nature Electrical components Region South West Type Limited Company Years Trading 15 Target rate 7.0% Risk band A (Low risk) Estimated annual bad debit rate 1.5% Loan details Term 36 months Loan purpose Expansion/growth Capital Director guarantee Loan guaranteed Asset security No asset security < Back to listings Bid Summary All bids My bids (2) Rate 9.0% 9.0% 8.9% 8.8% 8.7% 8.6% Amount 6,360 3,980 12,320 9,440 5,220 3,880 Status Only 2 days 22 hours left Auction ends: 15/12/ :26 My live bids: My average rate: 8.7% Funds available: Amount* 20 Rate* 8.7% bid at 8.7% For new loan requests, bid on each one individually by placing the amount and rate in the bidding box in the right hand column. 8

9 Section 3 - How to lend: hand-picking businesses For loan parts, select those you want to buy using the tick box and click on the Buy Now button. Summary How It Works Transfer Money Autobid Loan Requests Loan Parts buy parts of loans from other lenders the buy it now option Selected loan parts Click here to buy them Available funds: Total loan parts to be purchased: Buy Now Available Loan Parts Title Risk Repayments Premium/Discount Sale Price Buyer Rate Exposure Buy Ability Systems B (Below average risk) % [ +0.30] % - Addition Working Capital 163 A+ (Very low risk) % [ +0.16] % - Successful Kitchen Showroom 114 A (Low risk) % [ +0.34] % - Refurb to Offices 154 A (Low risk) % [ +0.34] % - Select the loan parts you want to buy Quick fact: the Premium/Discount column When you buy loan parts, you ll notice that some are available at exactly the same rate (par value), some have been marked-up (a premium added) and some have been marked-down (discounted). This simply means that as the buyer, you will pay a more, less, or the same for the loan part. For example: If you buy a 100 loan part that has a 3% premium added, you ll pay 103 for it (plus any accrued interest). Similarly, if you buy a 100 loan part that s been discounted by 3%, you ll pay 97 (plus any accrued interest). Sellers often add a premium if they have secured a particularly high rate of interest on that loan part and feel confi dent it s still an attractive investment to a new buyer. Similarly, investors often sell at a discount to release their capital more quickly so they can bid on new loan requests particularly if they see an opportunity to earn a higher rate on a current auction. 9

10 Section 3 - How to lend: Autobid Lending: the Automatic way Lending Automatically with Autobid suits investors who: Don t have a lot of time to spend selecting individual businesses, or are interested in selecting businesses solely by risk band. Are happy to invest in both new and existing loan. 3 steps to lending automatically with Autobid Quick fact: Autobid will only buy loan parts when the investor is selling them at the same interest rate they originally secured. Any investors selling loan parts at a premium or discounted interest rate will not be bought by Autobid. For more information on selling loan parts at a premium or discount, see the Quick fact box in the previous section. Step 1. Set your rate using the slider bar Step 2. Diversify by setting the maximum percentage of your portfolio to lend to any one business. It is important to spread your money across many businesses to minimise the impact if any one of them is unable to fully repay their loan. Step 3. Click the Turn Autobid On button and accept the T&Cs on the following page. Summary How It Works Transfer Money Autobid Loan Requests Step 1 Step 2 Autobid Settings What average rate would you like of offer 8.6% Maximum % of portfolio lent to one business Available funds Lending speed 1% ( 40 - Approx.) 580 Medium Slow Fast Step 3 Turn Autobid On Advanced setting 10

11 Section 3 - How to lend: Autobid Advanced Autobid With Advanced Autobid you can select individual risk bands you want to lend to, for example, only lend to businesses with an A+ risk band, or lend to all risk bands except C. Risk grades range from A+ (lowest risk) to C graded businesses. Here s how to set these different rates: Select the advanced settings link at the bottom of the Autobid page If there are any risk grades you don t want to lend to, de-select them by removing the tick from the check-box (left hand column) Set the rate you are willing to lend at for each risk band Click the Turn Autobid on button Quick fact: Autobid lends to businesses based on the credit risk band they fall into. It does not do any additional assessment or remove the risk of defaults. Summary How It Works Transfer Money Autobid Loan Requests Autobid Settings What average rate would you like of offer Maximum % of portfolio lent to one business Available funds 1% ( 40 - Approx.) 580 Include Risk band Offer rate Borrower target rate Est Bad Debt Lending Speed A+ (Very low risk) 8.1% 6.0% 0.6% Slow Fast A (Low risk) 8.3% 7.0% 1.5% Slow Fast B (Below average risk) 8.9% 8.0% 2.3% Slow Fast C Band line 10.4% 8.0% 3.3% Slow Fast Turn Autobid On Basic settings Understanding risk While only businesses that have passed Funding Circle s credit assessment process can borrow, it s important to understand that there is an element of risk when lending to small businesses. Read all about how to manage risk on our website to help you make the right decisions for you. 11

12 Section 4 - Rates, fees and interest Rates, fees and interest Rates As a Funding Circle investor, you can choose the rate you want to bid at, from 4% (minimum) to 15% (maximum). It s important to factor the following in when setting your rate: Risk: use our risk grades and the detailed business information and fi nancials to make an assessment of risk Average rates: you can review previous rates that investors have bid at in the statistics section to help guide the rates you offer Estimated bad debt: as part of lending to businesses, from time to time there will be instances where a business cannot continue to repay their loan (this is called a default). We provide estimated bad debt rates for each risk band and update these regularly. You can see these estimates on under the marketplace tab. Use these estimates to help guide your decisions and rate setting Fees As an investor you pay a 1% annual fee on the amount you ve lent to businesses (this is payable on the capital only, and only when a business makes a repayment). There are no fees charged for placing a bid or on amounts that aren t lent out. There s a 0.25% admin charge on any loan parts you sell. That s it no account fees, hidden charges or costs! Interest The interest you earn is paid by the businesses on a monthly basis. During the month, you accrue interest daily, which is shown in the summary section of your account as accrued interest. What is negative interest When you buy loan parts from other investors, you will need to pay them any accrued interest they ve earned since the last repayment, which shows as negative interest until that repayment comes in. This is because loan parts can be bought and sold at any point and to keep things fair, if you buy a loan part mid-way between repayments, the previous owner will earn the interest for the days before the sale, and you ll earn the interest for the days after the sale. It shows as negative interest because you ve paid out for interest that is owing but hasn t yet been paid by the business. 12

13 Section 5 - Accessing your money Selling your loan parts and withdrawing money You can sell loan parts at any point and there are a few reasons you may want to do this: 1) To release funds so you can bid on other loans 2) To withdraw your money 3) To earn a profi t on the loan part by selling at a premium to the price you paid How to sell loan parts Use the Sell tab in your account and choose from two sale methods: Summary How It Works Transfer Money Autobid Loan Requests Autosale Sell Individually Loan Parts for Sale Loan Parts Sold Autosale automatically sells a portion of your existing loans. amount for sale 100 Next > 1) Autosale: sell a portion of your lending here by setting the amount you wish to sell 2) Sell individually: choose the specifi c loan parts you want to sell on. You can also choose to add a premium to the cost, which simply means the new buyer will earn a lower rate of interest to the original rate you set at the auction stage. As the original investor, you get to keep the difference. Selling loans at a premium or discount how does this work If you sell a loan part at a premium, you add a mark-up (of up to 3%) to the loan part. Eg, if you sell a 100 loan part with a 3% premium added, it will cost 103 (plus any accrued interest). As a result, the new buyer s rate of return is slightly lower than the original rate you secured on the loan part. The premium is added to the cost of the loan part (ie, the principal outstanding and any accrued interest). As the seller, you receive one payment for this total cost (including the premium) and this is your fi nal payement. You ll no longer receive interest once the loan part is sold. Similarly, if you sell at a discount, you offer the loan part at a mark-down. As a result, the buyer will earn a higher rate than the original rate you secured on the loan part. Withdrawing your money You can withdraw your money at any time. If you have available funds that haven t yet been lent to business, you can transfer these to your chosen bank account using the Transfer money tab. If you have money lent to businesses, once you ve sold these loan parts onto other investors you can withdraw the funds using the same process. The minimum you can transfer out of your account is

14 We hope this guide has been useful. If you have any questions you d like to talk through,simply call us on: (Monday Friday, 9am 5pm). Enjoy lending!