Funding Circle and finance – the latest options

They say a week is a long time in politics, but it seems it’s a long time in the lending markets too! Just a week ago, Funding Circle were obliged to notify the Credit Reference Agencies if a borrower took a payment holiday. Now we’re hearing that not only can you now take a payment holiday without Credit Reference Agencies being advised, but there are other options too.

The following packages have been offered to two of our (very helpful!) contacts in the last 24 hours, but we’re not entirely clear whether they are generally available or not. It has to be worth asking about them though, if you have a Funding Circle loan and need some flexibility with your payments.

Option 1 – Short Term Payment Plan – Partial Payment

• Three months of paying one third of your usual monthly payments.
• Monthly calls with a Collections Account Manager to review the ongoing situation.
• Revert back to the usual payment amount after three months.
• Clear arrears by the end of the contractual loan end date.
• If a payment is late then it will impact your credit rating.
• If payments are made in accordance with the above, there will be no report to the Credit Reference Agencies.

Interest due across the remaining term of the loan will increase, as the repayment will be slower, and will need to be paid off over the term of the loan.

Option 2 – Short Term Payment Plan – Payment Holiday

We’ve seen less detail of this option, but what we have seen suggests the following:

• Three months of NO payments.
• Fifteen months to repay the arrears.
• If a payment is late once the Payment Holiday has ended e.g. late on full monthly repayment at month 4, then it will impact your credit rating

As with Option 1, interest will accrue on any amounts unpaid, so over the term of the loan will be higher than originally indicated.

Common Features

Both options specify that if the loan falls three payments in arrears, the loan will be defaulted. This is when the Credit Reference Agencies would be notified.

Any late fees are being waived.

There is a phrase repeated many times within the information that we’ve seen, which is that Funding Circle ‘understand that this is a really challenging time, and we want to help you as best we can and provide as much flexibility as possible’. They also state that this is ‘a fast-moving situation and we will be in touch if this changes’. This suggests that they’re continuing to review and develop their options for businesses, in line with most lenders.

The maximum term for both options is currently stated as a maximum of three months. This is in common with the various Government schemes and mortgage holidays already being offered. If the time scales for those schemes was increased, it would be realistic to expect Funding Circle to review this.

How do I apply for these options?

You can contact Funding Circle on 0203 966 1186. We would recommend that you have answers to these questions prepared before you make contact.

One of the businesses we have received the details from was asked the following questions as part of the process:

• What do you expect your main outgoings to be during this period? Please cover invoices due to be paid, any payments to other lenders, rent and staff.
• Do you have any contingency plans in place to steer your business through this period? Please cover use of government’s business support measures and other sources of support e.g. family/personal and agreements with other lenders.
• With reduced monthly payments on your loan with us, are you confident that your business could survive the lockdown and resume normal trading afterwards?

Please let us know how you get on when you speak to them; it’s really helpful for us to be able to pass on news of any developments.

What if I neither of these options give me enough support?

It is sadly still likely that some businesses will not be able to make an arrangement with Funding Circle that enables them to cover their payments. If this is the case, we would suggest speaking to your bank about a Coronavirus Business Interruption Loan (CBILS) to reduce the pressure on cash flow.

Make sure that you avoid any implication of refinancing in your conversations with any potential CBILS lender, as this is a specific exclusion of the scheme.

CBILS loans are not coming through quickly. As of yesterday (9th April 2020) 300,000 applications had been made, and just 2,000 agreed.

Some lenders have withdrawn from the market, as they are unwilling to lend without the Personal Guarantees that the Government has insisted are not requested. Others have been inundated with applications and simply cannot cope.

The Alternate Finance industry may be an option, as theses lenders tend to be more agile, and less rigid than the traditional banks. If you would like to speak to someone for more advice, let us know and we can provide some contact details of people that we believe are both reputable and helpful.