We receive a large number of applications for loans every week but on average we reject in excess of 90% of all applications received.

We recognise that traditional credit scoring approaches are limited, as they are largely based on historic data. Whilst the past is important in allowing us to form an opinion regarding the management’s strengths and abilities, it is the future cash that will see the loan repayments made. So we equally consider the ‘direction of travel’ of the business – where it is now and where it is going.  The core consideration with any loan opportunity is our assessment of the people. The financial performance of a company is only ever the by-product of the decisions made by the people.

To achieve a rounded view of any company, we make use of a number of tools in addition to those that are used as standard by the industry such as fraud, money laundering and credit checks. These additional checks include negative media searches, cashflow forecasts and telephone interviews with every borrower, which allows us to develop our own relationship with the individual(s) that we are trusting as custodians of our Lenders’ cash.

One of the results we aim to achieve as a result of our interview is to obtain the borrower’s emotional “buy-in” to the crowdlending concept. He is not borrowing from an anonymous institution. Instead, a number of individuals are entrusting part of their savings to him. He has to respect this relationship of trust. We find this approach often has a significant impact on the borrower’s determination to respect his obligations under the loan.

Once a case is ready for consideration, we operate a credit committee comprising senior FK executives and external appointees from a financial or lending background.

If you are a UK resident individual, FundingKnight will not make any deduction for tax. The same applies if you are a UK company, a UK approved pension scheme or UK LLP.  If you are a resident outside of the UK and the original loan term is more than 12 months, then we are normally obliged to deduct basic rate income tax from the interest. Where there is a suitable Double Tax Treaty and HMRC confirms that you have filed the relevant paperwork then we will be able to pay you gross.

Further details can be found on the HMRC website

The yield on your investment will vary according to several factors; the bids you make and which are accepted, the Shield Ratings of the loans you invest in, the term of the investment, the loans which default in your portfolio and any tax which you are required to pay on your investment.  Remember that we charge no fees to invest, so the interest that you bid, is the interest that you will receive.

For more information on the average rates of interest achieved over recent loans, visit our Statistics Page which will also give you infomation on estimated annual default rates.

For more information on Tax, visit our Tax Explained page  or contact your tax adviser.

Our Shield and Castle Rating system was developed to give you an overview of which risk bands we consider a loan falls into.  A Shield Rating is assigned to each Business Loan and a Castle Rating is assigned to each Property Bridging Loan presented on the site. We currently offer loans of 2, 3, 4 and 5 Shield for Business Loans and 3, 4 and 5 Castles for Property Bridging Loans.  The higher the number of Shields/Castles, the better the rating, therefore 5 Shields/Castles are those ratings assigned to the strongest companies. The higher the rating; the lower the perceived risk.

Estimated default rates for Shield Ratings:

• Five Shields:     0.5%
• Four Shields:   1.25%
• Three Shields:   2.0%

When you are bidding in auctions, or buying loan parts on the Loan Exchange, you should seek a higher interest rate return from loans with fewer shields to compensate for the increase in risk.

We use two methods to assess each loan; an external industry-standard credit agency rating for the company and our own ‘Shield Rating’ for Business Loans or ‘Castle Rating’ for Property Bridging Loans.

We currently offer loans on our platform with ratings of 2, 3, 4 and 5 shields and 3, 4 and 5 castles – with 5 being those we regard as least risky. The external agency rating is predominantly based on publicly available information. The FundingKnight Shield and Castle Rating is based on a holistic assessment of the business which includes both the current and projected management figures and additionally, our assessment of the management team following interviews with the company.   The Shield and Castle Ratings therefore give you an indication of our assessment of the perceived risk.

Yes.  You should assume that a small proportion of loans will run into difficulties. We do all we can to prevent this happening, including extensive checks on all companies that apply to borrow but it is inevitable that a small proportion could fail. It is strongly advised that you minimise the impact of this risk to you by spreading your investments across as many loans as possible. This will lessen the impact of any one company failing.

Visit our statistics page  to view both the expected default rates and the actual rates we have experienced to date.

You should also read the page on ‘Understanding Risk’  to ensure you have understood the potential risks associated with crowdlending.

At FK, we decided that we would maintain a policy of complete transparency and this particularly covers information on loan repayments.  We therefore decided to declare any issues at very early stages and have classified our loans into 4 categories; Performing, Non-Performing, In Recovery and Written Off.  The explanations for each category are outlined below:

Performing loans are those which give us no reason to believe that the loan won’t be paid. There may be the odd payment that is late, but we are still comfortable that the loan will be repaid.

Non-performing means that the borrower either has a repayment due of more than 45 days or, if earlier, we are no longer comfortable that the loan will be repaid. We are in regular discussion with the borrower and will post updates to the “additional info” box on the loan details, as these discussions progress. Loan parts may still be traded on the Loan Exchange, but with additional risk warnings, and the sale offer will no longer show a Shield Rating or an expected annual return to prospective buyers. At this stage, it is possible that the loan could return to ‘Performing’ but our concerns are sufficient that we wish to make early disclosure of them to Lenders.

Loans in debt recovery are those where we have become aware of a material event which has caused us to either start formal debt recovery proceedings, or start asking for payments from the guarantor. A material event could be that a company has entered liquidation or that the Borrower is not communicating with us. At this point, trading on the Loan Exchange is suspended.The recovery of loan debt and security, especially in calling in personal guarantees, can take a long time, particularly if care is being taken to maximise the amount recovered rather than to conclude the case quickly. There is therefore no basis as yet for estimating the likely amount recovered from loans in recovery.

Loans written off mean there is no potential for further settlement through debt recovery proceedings following a business failure. At this stage, it will appear on Lenders’ tax statements as a capital writeoff, but will no longer appear on the “My Dashboard” page which is a reflection of your current portfolio.

The definitions of each aren’t quite as clear cut as a good loan/bad loan and therefore you may find that some loans classified as ‘In Recovery’ are companies whose principals are making payments honouring the Personal Guarantees that they gave at the outset.

To find information on the actual performance of our current loan book to date, please visit our Loan Statistics page.

You should also ensure that before investing you have carefully read the information on our page ‘Understanding the Risks’.

Any un-lent funds deposited in your Lender account are held by our bank in a designated client account and ring-fenced from the assets of FundingKnight. These funds would therefore continue to be separate from FundingKnight Ltd and not available to its creditors.  In the event that FK ceases to trade, we have appointed Complete Cash Management Limited to administer the collection of loan repayments and apportion them to the relevant Lenders.

In the event that the bank holding your funds should get into difficulties then your cash is protected by the Financial Services Compensation Scheme, even if you have committed it in our auctions. However the Financial Services Compensation Scheme does not apply to funds invested in loans. To read more about understanding the risks – visit the page ‘Understanding the risks’

FundingKnight will closely monitor and communicate with borrowers throughout the lifetime of the loan, including requesting periodic updated financials and management information. We also continue to monitor the companies through external credit agencies for any changes to credit scores or other potentially relevant information.  However, it is possible that a loan will default. If this happens, we will work with the borrower and any guarantors to recover whatever is possible from the borrower and guarantors and distribute any recovered funds proportionally to the Lenders in the loan. In the event that a borrower goes out of business, we will work with the administrator to recover as much as possible from the company. We will also activate any security taken at the time of the loan and invoke Personal Guarantees given by the principals. In some cases, we may choose to appoint a debt collector.

We will keep affected Lenders updated of any developments in a timely manner, via the ‘updates’ tab of the Loan Details. We will inform you by direct email immediately we publish a new update.

FundingKnight does not currently offer a compensation scheme to protect against any losses, should a company that you lend to default on the loan.  When investing with FK, you should ensure that you spread your investment across as many loans as possible to minimise the impact of any one loan defaulting. Please visit the page on ‘Understanding the risks’ to read more about this.

The coupon is the underlying interest rate that the borrower is paying on the offered capital i.e. the rate originally bid in the loan auction. It is used to calculate the repayment schedule.

This is the interest that the borrower has accumulated on this loan part up to today. When the borrower makes the next payment, this accrued interest will go to whoever owns the loan part at that time.

This is the rate that a prospective buyer would receive if they bought the loan part today at the asking priceand kept it until redemption. It takes into account the timings of the scheduled payments. It is calculated before any liability for tax and any adjustment for bad debt and assumes that the borrower makes all future payments on time.

Occasionally you will see that the pennies on your dashboard do not appear to add up correctly. This is because FundingKnight track balances to 6 decimal places (i.e. to a 1/10,000th of a penny.)  However, we round them at time of display down to the nearest whole penny. Over time, the thousandths add up, and customer balances “click over” to create an extra penny out of previously hidden information.

For example, if you start with a balance of 27.6500p and receive a payment of 3.4300p, your balance would then be 31.080p. Because we round down the figures at the time of display, your starting balance would display as 27p and the payment received would display as 3p, but you would end up with a display total balance of 31p and not 30p.

Why do we do this? Simply, because it’s fairer to you!

As part of the process of making our Loan Exchange as free a market as possible, we continue to allow loan parts to be offered on the Loan Exchange even if a repayment is overdue. We believe that lenders may always wish to realise loans and there could well be other investors ready to take some additional risk on buying these loan parts at a better price. The important thing here is that such loan parts offered for sale carry a clear disclosure of the risk and additional risk warnings, prior to purchase.

Where the reason for an overdue payment is clearly down to a failure by the borrower, we classify these loans as “non-performing” on your portfolio. Where the reason for the non-payment is sufficiently serious that we consider the borrower either cannot or will not continue making payments the loan is moved to the “Recovery” section and we suspend trading in that loan on the Loan Exchange.

There could be a number of reasons for this:

• The most common reason is that when payment is due from the borrowr, but has not yet been received or processed by FundingKnight, any offers for sale of loan parts on the Loan Exchange will automatically be suspended for up to five days. These offers will automatically resume when payment is made and processed. If the payment is not received during this time, the loan sale offer will resume after five days, but the impaired payment history will be shown and the relevant warnings displayed to potential purchasers.
•  It is not possible to sell a loan portion in the period 6 days before the final due payment, or any earlier date on which the borrower has told us they are intending to repay the loan in full.
•  The ability to trade loan parts on the Loan Exchange may be suspended or removed in the event that loan repayments have been missed, or if any other event has put the borrower ‘in default’. If this occurs, Lenders holding parts in the loan will be notified by email that trading will be stopped.

This is either a purchase or sale that you have made through the Loan Exchange. The Novation is the mechanism which enables the buyer to take over the seller’s legal relationship with the borrower.

The Loan Exchange is a trading platform that allows Lenders to sell part or all of their loan positions to other registered FundingKnight Lenders, or to buy loan parts from other Lenders, either because they wish to expand and diversify their portfolio or have missed the opportunity to participate in a Live Auction. For more information visit our Loan Exchange page.

From your dashboard, you can see all the loan parts that you have in your portfolio and can offer them for sale at a price of your choosing (subject to certain conditions outlined below). Please note that you do not have to sell the whole of your loan holding; you can choose how much of it you wish to sell. Loan parts for sale will then appear on the Loan Exchange which allows other Lenders to view details of the loan and buy those positions.   The details provided include the capital remaining, the selling price, and full information about the loan (as it originally appeared when the loan auction ran), as well as the payment history and any updates on the company or the loan.

To purchase loan parts that other Lenders have for sale, visit the ‘Loan Exchange’ via the links on your dashboard and you can view all the parts for sale. You can filter loan parts by company, investment value, term remaining, shield rating and minimum interest rate.

Purchases or sales of loan parts will be shown on your statement as a ‘Loan Novation’.

If you have a pension where you can select the investments, such as a Small Self-Administered Scheme (SSAS) or Self Invested Pension Plan (SIPP), then you can in theory use this to hold FundingKnight loans. In practice the current reporting and regulatory requirements for pensions mean that this is much more likely to be approved for a SSAS than a SIPP.

Not yet. The government has announced a consultation on ISAs included in P2P lending (crowdlending) and it is hoped that the draft rules will be set out later this year. At this time we will be able to evaluate the best options for our Lenders.

Subject to approval by your pension fund administrator, it is possible to invest through some forms of UK approved pension funds. The Government has also announced that it will in future be possible to include crowdlending in ISAs; the rules for implementing this are currently being drafted.

FundingKnight loans normally run between 6 months and 5 years but should you wish to withdraw your cash sooner, our Loan Exchange can help you to access your money. Simply choose how much of each loan you want to sell, what price you require and offer it for sale to other investors on our busy Loan Exchange. As all loan parts offered for sale require another investor to purchase them, we cannot guarantee that all loan parts offered will result in a successful sale.

We charge a 0.5% fee to investors selling all or part of their investment on the Loan Exchange. You can read more about this on our Loan Exchange page

When you first registered as a Lender, you will have provided details of a bank account where we will deposit all funds that you withdraw from your Lender account. To withdraw funds, simply log in to your account, click on the tab ‘My Money’ in the main menu bar and select ‘Withdraw Money’ and enter your request.  Please note that you cannot withdraw funds which are committed to bids or already invested in a loan. To access funds you have invested in a loan, visit our page on the Loan Exchange for details of how to access your cash.

We do not pay interest on uninvested funds. To get the best return from using our platform you should log in and look at your dashboard on a regular basis to minimise uninvested funds in your Lender account, using Live Auctions and our Loan Exchange to make new investments. If you have limited time for doing this and wish to be fully invested, you should also consider enabling Autobid, which provides a range of options to make bids in new auctions and invest your surplus cash.

Tax reports detailing the interest and capital repayments are available to logged-in lenders. Simply access the information from within ‘My Money’ and select ‘My Tax Reports’. It is also possible to change the date range on these reports to suit specific requirements, which includes the ability to move the dates forward a year. If the dates are moved to future, it is worth remembering that the tax report only provides data on the actual income received to date – it’s not a tax forecast of any payments you might get between now and the end of the tax year.

The loans are repaid monthly (following an upfront payment holiday, should this be applicable) directly to FundingKnight and each gross repayment apportioned to each Lender. Your repayment will be allocated to your Lender account and will constitute interest earned since the last payment and a capital repayment. Once these funds are in your Lender account, you are free to reinvest or withdraw them, as you wish. A loan will not normally be repaid in full until the end of the loan period, although borrowers do have the option to repay in full early if they wish.

Our standard auction period is 7 days. This may be shortened if the borrower has requested an accelerated auction to draw down the loan the moment that it has filled. It is normally in the borrower’s interest to let the auction run for its full period, to ensure they get the lowest rate. We have never extended our auctions and all our auctions have been filled.

We have taken two steps to ensure that when an auction is launched on our platform, the Borrowers have certainty that they will have a loan when the auction closes and Lenders know they can start earning interest immediately on all successful bids.

The Borrower is committed before the auction starts.

Before the auction begins, the Borrower completes legal documentation committing to accept a loan, provided that the average rate of interest achieved in the auction is at, or below, a maximum rate (known as the Reserve Rate).  This means that there is no delay after the auction while the Borrower signs documentation – and no risk that the Borrower will withdraw because they change their mind.

We have arrangements with Investors to ensure that auctions are fully taken up at the Reserve Rate.

We have a wide range of investors, with individuals being able to participate in loans from £25 upwards.  We also have some larger investors, who regularly invest £1000 or more in each auction.  Some of these larger investors are individuals.  Others include pension funds and companies.  One of our corporate investors, GLI Finance Ltd (GLIF), a company whose shares are listed on AIM and a shareholder in FundingKnight, has agreed to participate in each auction and invest in whatever proportion of the loan which is not taken up by other investors.  It does this by bidding in the auction alongside other investors. These bids are placed gradually during the life of the auction and all bids are at the Reserve Rate.  GLIF ceases to bid when the Reserve Rate for the auction has been met.

By bidding in this way, GLIF is putting its interest in the loan behind other investors.  Any investor bidding at the Reserve Rate early in the auction will rank ahead of GLIF.  Any investor bidding at below the Reserve Rate at any time in the auction will always rank ahead of GLIF, so if an auction proves particularly popular and is fully taken up by competitive bids at below the Reserve Rate, GLIF will not be able to participate in the loan.  However, if an auction is less popular and investors will only bid at rates above the Reserve Rate, GLIF will be the lowest bidder and will be obliged to take up a large proportion of the loan.

These two steps ensure that when the auction closes, the Borrower is paid on the same day and Lenders start to earn interest immediately.

You will start earning interest on the same day that the auction closes. Since FK requires Borrowers to commit to drawing down funds immediately the auction closes, your funds will start to earn interest without delay. You do not have to wait for the Borrower to sign documents, with the additional risk that they may change their minds and choose not to take the funds. We reserve the right to withdraw an auction at any stage before the funds are remitted to the Borrower, should new information become available that adversely affects the auction or the perceived risk.

The Reserve Rate is the maximum average interest rate that a borrower has agreed to pay to lenders. All borrowers through FK are committed to draw down funds immediately following the close of an auction, provided the auction has been 100% filled and has reached its reserve rate.  Prior to the start of an auction, the Borrower is required to agree a maximum average rate (known as the Reserve Rate), over which they would not be prepared to take the loan. The reserve rate varies from auction to auction and can be influenced by a number of factors including perceived risk, Shield Rating, external credit rating, trading history and projected future performance, loan term and by the borrower’s particular circumstances.

We currently provide loans that can be any period (in months) from 6 months to 5 years duration. You can choose the length of your investment by choosing loans of a duration that suits you. You may, of course, exercise the option to access your cash at any point in the loan term, by offering your loan parts for sale on our Loan Exchange. As all loan parts offered for sale require another investor to purchase them, we cannot guarantee that all loan parts offered will result in a successful sale.

We normally provide Business Loans of between £25,000 and £500,000 and Property Bridging Loans of between £100,000 and £500,000.

Information on loans offered is only made available to our registered lenders.  The Loan Details pages for each loan provide financial information on the borrower, the reason for the loan, along with profiles of the business and its key management. You will also have the opportunity to ask borrowers questions directly through the site; these questions and answers are available to all our Lenders to view.

Yes. At the moment, all bids on our site and questions posed to borrowers are listed anonymously as ‘hidden’. We reserve the right to change this at any time to a visible identifier.  However, the only information that will be visible about you is the username which you choose at the point of registration. We will never reveal or display your personal details – including your real name – on the site.  You should therefore choose a username that does not give away any details about your identity, should you wish to remain anonymous.

We provide loans to UK based Limited Companies or LLPs with a minimum of 2 years trading history (and one year’s filed accounts). We do not lend to start ups or sole traders.

We charge no fees to Lenders to invest in loans, either on the Live Auctions or on our Loan Exchange. We charge a 0.5% fee to Lenders who wish to sell their loan parts on the Loan Exchange.

Loan parts are normally on offer on the Loan Exchange in sizes of between £25 and £1,000. If you are interested in investing more than £1,000 in an existing loan, contact our office and we will see if we can arrange for you to do this ‘off-market’.

The minimum amount you can invest overall or in any one loan is £25. We don’t insist that you lend any more than that to get started, although we would advise that you spread your risk as much as possible by lending across a number of loans. There is no maximum lending limit, but please note that a single lender is normally restricted to a maximum of 20% of any particular loan.

Once the funds are received by our bank, they are allocated to your Lender account at regular intervals during the day, from Monday to Friday. At the weekends we operate a more limited service. The length of time taken for money transferred from your account and credited to ours largely depends on which bank you use, the amount of the transfer and whether your bank operates ‘Faster Payments’.  In our experience, it can regularly take 2-4 hours between Lenders sending funds and our bank showing them on our client account. Larger amounts above £1,000 can take longer to appear.  For more information, you should refer to your bank for their policy on transfers and if you require any assistance, please don’t hesitate to contact us.

You can transfer funds directly into your account. Simply quote your unique Lender account number (shown on the ‘My Money/Add Money’ screen) so that they are credited to your Lender account.

When you make your first deposit into your FundingKnight account, we will need you to register your bank account details.  This information is required both for your security and convenience. All funds that you withdraw from your FK account are paid into this account. Any requests to pay funds into a different account will require your written consent and be subject to security checks.

We will not carry out any credit checks. However, we will need to confirm your identity before we can accept your registration. This requires us to conduct anti-fraud and anti-money laundering checks in line with legal requirements. On some occasions we may need applicants to supply additional information, but the vast majority of our UK lenders can normally be accepted within 24 hours.  As the checks that we carry out are purely identity checks, they will not mark your credit history.

If you don’t appear to have received the confirmation email following registration – please check your spam folders! In most cases, you will find the email there. If you still don’t appear to have received it, please drop us an email on info@fundingknight.com or call us during office hours and we will be happy to assist you.

It is possible to Lend with FundingKnight if you are resident overseas. However, the identity checks required by the Anti Money Laundering regulations for overseas residents will usually require more information and take longer.

Most FundingKnight lenders are individuals who live in the UK. Although it is possible to Lend if you are an individual living outside the UK, it is a requirement that you have a UK £ sterling bank account. You will also need to be over 18 years of age. If you are uncertain if you qualify or would like further information, get in touch with us on info@fundingknight.com and we will be happy to advise you.

Other UK entities may also become FundingKnight Lenders. We can accept applications from companies, limited partnerships (LLPs) private trusts, pension funds and registered charities. We will review such applications on a case by case basis and subject to our absolute discretion. As a minimum we will want to ensure that we can meet our Anti Money Laundering obligations and that the entity is allowed to invest in FundingKnight loans.   Currently we do not accept applications from companies unless they are either listed on a recognised exchange or a close company.

Simply click on one of the registration links and provide us with a few basic details. We will then perform some checks to verify your identity and set up your secure Lender account with FundingKnight. All you need to do then is to deposit a minimum of £25 and you are ready to start investing.