Funding Circle Review – The Good and Bad for 2022

Funding Circle is a lending platform that aims to help small businesses secure the finances they need. The service offers several perks that attract entrepreneurs, including an easy online application, quick payouts, and low monthly payments. But is Funding Circle worth the hype? In this review, we’ll outline the pros and cons. 

Funding Circle Compared to the Best Small Business Loans

If you’re looking for the best business loan services around, check out our Golden Eggs—the brands we highlight in our list of the top small business loan services. 

With a single application, Lendio matches you to one of 75 different lenders, giving your small business the best possible loan for your circumstances. Best of all, it’s 100% free to fill out that application. 

If you’ve been in business for at least a year and need money now, OnDeck offers lightning-speed lending to qualified borrowers. Filling out the application is free and easy.

Bluevine offers a fully-featured business banking system with a payment processor, checking account, and credit line to help fund your hard work. Getting started with Bluevine is free of charge. 

Funding Circle: The Good and the Bad

As with every service, Funding Circle comes with certain strengths and weaknesses. What’s a deal breaker for one user might be no biggie for another. The important thing is knowing what the pros and cons are so you can make an informed decision. 

What Funding Circle Is Good At 

During our research, it became clear that there’s a lot users love about Funding Circle. It’s got lower interest rates than competitors, doles out cash within days after loan approval, and doesn’t penalize users if they pay a loan off early. Let’s take a closer look at Funding Circle’s strengths.

Lower rates: There are several factors that go into the loan rate you’ll get with Funding Circle, from the type of loan you’re applying for to how long your business has been up and running. And of course, your credit score will be a deciding factor. 

This is true for any lender, though, and with Funding Circle, investors tend to keep rates lower than what you might get through a different platform. Funding Circle makes no promises and loan rates can vary—a lot—but Funding Circle generally offers APRs between 11.29% to 30.12% for term loans. For comparison, other services might offer APRs starting at 29% and going as high as 97%.

Multiple financing products: Funding Circle advertises a range of financing products, including: 

• Term loans: borrow up to $25,000 to $500,000 and repay it over a term of six months to seven years.
• SBA loans: borrow $50,000 to $500,000 and repay it in up to 10 years—no prepayment fees if you pay it off sooner. 
• Working capital loans: get $25,000 to $400,000 in working capital from Funding Circle and repay it within six to 18 months. 
• Merchant cash advance: get a cash advance from $5,000 to $400,000 and repay it within three to 18 months. 
• Lines of credit: decide when and how much to withdraw from a business line of credit and repay it over a specific amount of time—typically 12 to 18 months. 
• Invoice factoring: borrow money against outstanding customer invoices with invoice factoring. With Funding Circle, you can borrow up to $5 million, receiving approximately 80 to 95 percent of each invoice upfront. 

This robust range of options means there’s an ideal borrowing solution for just about any user who qualifies. 

Dedicated account manager: Once you fill out an application, Funding Circle assigns you a dedicated account manager. When we studied reviews, users praised their account managers, often calling them out by name. 

According to these reviewers, Funding Circle’s account managers help users understand their loan options, answer questions, and guide them through the entire process of securing a loan. 

Quick cashouts: While Funding Circle advertises next-day funding, most loans pay out within one to five days of approval. This is still much quicker than a bank, which can take one to three months to pay out a loan after approval. 

Keep in mind that different loans can come with different timelines. Because it’s backed by the federal government, an SBA 7(a) loan, for example, can take longer to process than a business term loan or business line of credit. Still, Funding Circle usually gets SBA 7(a) loans to borrowers within about two weeks.

Zero prepayment penalties: It’s always good to pay a loan off early, right? Not so much. Lenders profit off of the interest you pay each month, and if you pay your loan off early, they don’t get as much of that profit as they expected. 

That’s why some lenders hit you with a prepayment penalty to compensate for the loss of expected profit. Funding Circle does not dole out prepayment penalties if you pay your loan off early. 

What Funding Circle Is Lacking

Even though Funding Circle comes with several good qualities, our research team found it inadequate in a few ways. For starters, it’s impossible for new businesses to apply for loans. In addition, Funding Circle charges high origination fees, and the company left the peer-to-peer industry recently, hinting at a lack of stability. Let’s take a look. 

No support for new businesses: Small business loans can be crucial to helping businesses get up and running, but Funding Circle is not an ideal choice for startups. To apply for a loan through the Funding Circle platform, your business will need to be at least two years old. 

Plus, your personal FICO score must be 660 or higher, and you—or your business—can’t have declared bankruptcy in the past seven years. Because of these strict requirements, some businesses that need loans the most won’t qualify to get them through Funding Circle. 

Above-average origination fees: Despite advertising low interest rates, Funding Circle charges origination fees between 3.49% to 6.99% of a loan amount. This is higher than the average of 3% to 5%. Instead of paying the loan origination fee up front, Funding Circle adds it to your monthly payment. 

Other business loan funding services, such as those on our list of the top small business loans, charge lower—or no—origination fees. 

Stability and transparency issues: Though it began as a peer-to-peer lending platform, Funding Circle officially left the P2P industry in March of 2022. The loans it facilitates now come either from industrial investors or government lenders. 

The change has left many retail investors unhappy with the company. Retail investors have complained that it’s been difficult to get their money back from Funding Circle in a timely manner. Some newer borrowers, on the other hand, have alleged getting approved for a loan—and then being told there’s no money to pay the loan out.

Pushy marketing practices: During our research, we found dozens of customer complaints regarding unwanted communication from Funding Circle. It appears to be difficult to unsubscribe from Funding Circle marketing campaigns, including emails, phone calls, and even letters. While this isn’t necessarily a critical flaw, it’s certainly exasperating.

Funding Circle Options and Pricing

Funding Circle offers a variety of different borrowing options. Before you apply to borrow anything through this platform, make sure your business meets Funding Circle’s requirements. The business must have two years of operating history with at least $50,000 in yearly revenue. Business and personal FICO credit scores must be above 660. The three products Funding Circle advertises most heavily are a business line of credit, a business term loan, and an SBA 7(a) loan. 

Funding Circle Business Line of Credit

Like a credit card, Funding Circle’s business line of credit option offers companies a set amount of money to borrow. You only pay interest on the money you use from the credit line. 

A business line of credit is ideal for short-term needs. If you suddenly find that you need to cover payroll one month because several outstanding invoices haven’t been paid, for example, a business line of credit can fill the gap for you. If you promptly repay the amount you withdrew from the line of credit, you’ll be able to use that money again. 

On its homepage, Funding Circle advertises business lines of credit up to $150,000. However, a separate page dedicated to the business line of credit states amounts up to $250,000. Funds may be available in as little as one day. 

There’s no fee to apply for a business line of credit through Funding Circle, and you won’t need to pay a monthly maintenance fee, either. You will, however, have to pay a 1.6% average draw fee and a 5% average late-payment fee on any past-due amounts. 

Funding Circle Business Term Loan

A business term loan gives you a lump sum that you must then repay, with interest, over a period of time. Funding Circle offers business term loans from $25,000 to $500,000 and repayment terms of up to seven years. 

Loan money can become available in as little as three days. If you pay your loan off early, you won’t incur a prepayment penalty. 

Funding Circle’s business term loans are ideal for businesses that are expanding. If your coffee shop is so successful that you’re running out of space, for example, a business term loan can finance a remodel to expand your seating area. You might also need a business term loan to pay employees, purchase equipment or inventory, or cover unexpected costs. 

Funding Circle allows you to calculate an estimated rate, but you’ll have to fill out an application and submit the necessary paperwork to get a clear answer on pricing. And while Funding Circle’s homepage quotes terms of up to seven years, its business term loans page cites terms between six months and five years. Payments are made monthly or every two weeks.

Funding Circle SBA 7(a) Loan

Partially backed by the United States government, SBA 7(a) loans can be tricky to apply for. Funding Circle helps you navigate the process and can get you the funds in as little as two weeks. 

SBA 7(a) loans are great for startups—unless you’re applying through Funding Circle, which does not allow startups to apply. Funding Circle clients who choose to apply for SBA 7(a) loans are typically using the money to hire employees, pay off debt, or fuel their marketing strategy, according to the company. 

Funding Circle offers SBA 7(a) loans of up to $500,000 with a rate of Prime + 2.75%. Loan terms are 10 years. 

Funding Circle Merchant Cash Advance

A merchant cash advance (MCA) isn’t a loan at all. Instead, it’s a way for investors to purchase a percentage of your business’s future credit and debit sales. You’ll receive a lump sum of cash, which you must repay as you make credit and debit sales. Usually, this means you’ll be making payments every day or every week.

MCAs are an easy way to get quick cash when you need it. However, MCAs are expensive to repay. Unlike traditional loans, they’re paid back using factor rates. Most factor rates are between 1.1 and 1.6. 

If you have a factor rate of 1.6, you’ll pay $1,600 for every $1,000 you get in a cash advance. In addition to the factor rate, some investors charge an administrative fee for an MCA.

Funding Circle’s partners offer qualifying businesses $5,000 to $400,000 in MCAs.

Funding Circle Invoice Factoring

It’s always frustrating to wait for a customer to pay an invoice. If you have multiple customers who are taking the full 30 days or more to pay you for a product or service, you might need a way to keep paying for the business you’re doing while you wait for your income to arrive. 

That’s where invoice factoring comes in. Funding Circle gives qualified businesses the opportunity to sell their invoices to a lender. The lender will then pay you 85% to 90% of an invoice upfront. 

Invoice factoring can be a good option in a pinch, but it almost always involves you earning less on invoices than you would if you waited for customers to pay. In addition to interest rates, you may need to pay a weekly factor fee, invoice processing fees, early termination fees, and monthly maintenance fees. 

Funding Circle helps give qualifying companies $6,000 to $100,000 in invoice factoring. 

Funding Circle Working Capital Loans

A working capital loan is ideal for short-term expenses, such as buying replacement equipment or purchasing extra inventory ahead of a holiday season. A working capital loan is intended to act as your working capital—your current assets minus your current liabilities—for a short period of time. 

With Funding Circle, working capital loans are repaid using a factor rate between 1.15 and 1.6. Payments will be made every day or every week, and most loans will need to be repaid between eight and 16 months. 

With Funding Circle, qualifying businesses can borrow up to $400,000 in working capital loans.

Funding Circle in Summary

Funding Circle offers a range of options for established small businesses that need some buying power. With lower-than-average APRs, quick cashouts, and a dedicated account manager for each applicant, there’s plenty to like about Funding Circle. 

But it’s not the only option by any means. Lendio is a great option to connect with many potential lenders, OnDeck is known for getting loans super fast, and Bluevine includes a full business banking system. Check out our Golden Eggs—and the other small business loan services we love most.