3 ways Funding Circle prices risk for investors

We’ve lent over $2 billion globally – and as of April 2015, we have raised $273 million to continue building a sustainable, multi-billion dollar marketplace where individuals and institutions can invest in American small business with ease and transparency.

As we continue down our path of rapid growth, transparency will remain one of our core values at Funding Circle* – for our small business loan applicants, and our individual and institutional investors. In order to build trust and ensure confidence in our marketplace we want to share how we price risk through our credit process.

Transparency is necessary to appropriately price risk and assure stability in our marketplace. At the heart of our fraud and risk management efforts is a combination of statistical modeling, human interaction, and third party verification. Our integrated process allows us to price risk by being transparent with our investors and authenticating our borrowers.

1. Statistical modeling 

Funding Circle utilizes several statistical models throughout the credit decision-making process. We employ a pre-qualification screen that targets high-quality applicants that are highly correlated with the profiles of other borrowers who have been funded. Once a complete application reaches the Credit team, a proprietary model assesses asset levels, cash flow and various other credit metrics to generate a suggested risk rating.

2. Third party verification

Third party data sources are key in the credit decision making process. Funding Circle utilizes these data sources to verify the applicant’s identity and gather insight of an applicant’s historical credit performance. This ensures that every funded applicant meets Funding Circle’s credit policy guidelines.

3. The human element

Human review is an important component to the final credit decision. Once the application reaches our Credit team, an underwriter may reach out to the borrower for a credit call. This call allows the underwriter to better understand the business and how a Funding Circle loan will assist in the growth of the business.

Funding Circle’s integrated system of third party data sources coupled with statistical modeling and human review allows us to appropriately price risk for investors as well as achieve our mission of building a better financial world.

* “Funding Circle” refers to Funding Circle Holdings, Ltd, Funding Circle USA, Inc. and all of their affiliated entities. 

Post written by Funding Circle Securities.

Funding Circle Securities, LLC (“Funding Circle Securities”), member FINRA/SIPC, is owned and operated by Funding Circle USA, Inc. All securities related activities are conducted through Funding Circle Securities. Funding Circle Securities only offers investment products and securities of its affiliates, and such products and securities are not publicly traded and may be subject to holding period requirements. Securities offered through Funding Circle Securities are only suitable for Accredited Investors, as defined by Rule 501 of the Securities Act of 1933, who are familiar with and willing to accept the high risk associated with private investments. Investing in private placements requires high-risk tolerance, low liquidity concerns and long-term commitments. Investors must be able to afford to lose their entire investment. Carefully consider the investment objectives, risk, charges and expenses of any investment product prior to investing.

No communication, through this website or in any other medium, should be construed as a recommendation for any security offering. This website provides general and preliminary information about securities offered through Funding Circle Securities and is intended for initial reference purposes only. It is not a summary or compilation of all applicable information and is not complete. This website does not constitute an offer to sell or buy any Funding Circle Securities. There shall be no offer or sale of any securities without the delivery of confidential offering materials (the “Offering Materials”) and related documents. This information contained herein is qualified by and subject to more detailed information in the Offering Materials.

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