Banks have their place, I guess, but that place doesn’t seem to include the lending to small business market, as many retailers will attest. So I was very interested in the new concept of peer-to-peer lending. There are websites out there that match up borrowers and lenders, bypassing banks along with their high costs and long processing times.
This new approach has had a number of high-profile endorsements from the likes of the Bank of England, the BBC and government.
I had a call from Sabjali (known as Charlie) Mitha who runs SMA Convenience Store in Sheffield and who wants to buy a second business (since a ‘good deal’ has come his way). “But the banks will only give you 70% of the worth of the bricks and mortar and you have to chase all the time.”
Having recently researched the subject for C-Store’s sister paper Forecourt Trader I was able to tell Charlie about Funding Circle, which The Telegraph calls “the leading example of a peer-to-peer lender to businesses” and which has helped small firms borrow £40m in the past two years.
Funding Circle claims to be better for business loans because its lender auctions mean the borrower gets to choose the lowest cost loan available and it only takes two days to get approval for it. You can borrow anything up to £250,000 over one-, three-, or five-year terms.
Once your loan is approved it can take as little as 14 days to have the funds in your account, and the loan will be at a fixed rate. You can also repay early at no extra cost.
To borrow from Funding Circle you have to be an established and credit-worthy business (no sole traders) and have two years-worth of filed accounts.
(And a note to would-be investors: you’ll earn an average gross yield of about 9% with easy access to your money. If I had a few grand spare, that’s where I’d put it.)