How does FundingCircle vet potential borrowers?

eddyinfreehold

Bit of a gripe here. I checked my account today as it's the 1 year anniversary of my investment. I have about 10k invested and the annual net yield has been 6.1% after fees and losses ... not bad at first glance, with my investment spread over more than 400 small firms. Of these 12 have defaulted and 8 have gone into liquidation as Limited Companies.


It is not rocket science for me to check the paperwork of the Ltds. that have been liquidated. They all seem to have a track record of paying on the nose for about 6 months then defaulting then liquidating voluntarily. When you check the Receiver/Liquidator accounts they all have racked up massive disproportionate debts with suppliers and more worryingly HMRC . I know that if I was a FC Loan assessor, those are the first two place I would look on the books to see whether a business keeps its nose clean or not.


I would point out the return has been acceptable and I have not lost capital on my investment, it's just that it could be so much better...


Any thoughts anyone?

bxboards

eddyinfreehold wrote: »

Any thoughts anyone?

If these businesses were in good financial shape, they'd be borrowing from banks, not alternative lenders at high interest rates.

I used to use Funding Circle and I was amazed at the number of loans for 'unexpected tax bills' - how can a well run company have unexpected tax bills? That would have me running for the hills as a loan assessor.

At the end of the day, you are the person losing money, not Funding Circle, so what incentive is there *not* to loan money?

Tcquins

You will not be getting a yield of 6% without some dodgy credit lending.

That is just something you will have to accept if you go into P2P it is a supposedly higherreturn for a reason - higher risk because of a poorer credit mix.

Radiantsoul

I suspect they rely very heavily on credit scoring, to be fair the banks probably do the same. I believe there is a human who is supposed to check, but I doubt they very often over-ride the model. To be far the banks work in a similar way.

carolcarol

Hi

I am disgruntled too. Things were going well until they changed their auto bid system and I no longer have control on who I am bidding on. I have switched to the conservative mode just to protect my investment more but not sure if this is the thing to do. I was very excited this time last year on my funding circle dabbling but now I think it may be time to look else where. As the government is now investing in it that also means over supply of cash I would have thought so a long term reduction in the % given if supply and demand works in this scenario.

If anyone has an alternative plan, would be great to hear.

C_Mababejive

I too have stopped reinvestment in FS as i can no longer choose what i invest in.