Funding Circle revamps secondary market to boost liquidity

Funding Circle revamps secondary market to boost liquidity 1

FUNDING Circle is re-jigging its secondary market to help its investors withdraw their funds more easily.

The peer-to-peer business lender, which saw its average loan part resale time rise to 124 days this month, said that following a recent review, it is introducing a new selling tool on 2 December to improve access to funds.

Funding Circle’s auto-invest model means that investors’ funds are diversified across a number of loans. Investors wishing to sell their loan parts can do so on Funding Circle’s secondary market, subject to liquidity. Loan parts are currently sold on a first-come, first-served basis and investors need to reach the top of the queue before selling any.

“The new tool will cycle through all investors wishing to sell loan parts as many times as possible within a 120-day period,” Funding Circle said in a blog post on its website. “This will mean investors start to receive money back more regularly from the loan parts that have sold.”

The changes mean that Funding Circle investors who have been waiting to sell their loan parts for the longest amount of time will be put on a level playing field with all other sellers on the secondary market.

Lisa Jacobs (pictured), UK managing director at Funding Circle, told Peer2Peer Finance News that the team was “aware that [these investors] have been waiting for a while” but felt the new system was best for investors in the long term.

Funding Circle also announced that it is introducing a 1.25 per cent transfer payment, which will be deducted from the seller’s proceeds and go to the buyer of the loan part.

“We believe that this will boost returns for the buyer and therefore improve liquidity in the market,” Jacobs said.

She added that transfer payments are typical among P2P platforms and highlighted that Funding Circle does not receive any fees from loan part sales.

On 2 December, all investors currently selling loans will be automatically transferred over to the new selling tool. Every investor will continue to sell for 120 days and will receive a notification at the end of this period to confirm how much has been sold in that time.

If the investor would like to sell more loan parts, they can make another request and start selling loans again.

“The review has been a focus for the past couple of months and we considered lots of different options,” Jacobs said.

“This change, we believe, is the best solution for our investors.”

Funding Circle hit the headlines last month after The Telegraph reported that its investors were facing a 100-day wait to sell their loan parts.

The publicly-listed firm is not the only P2P platform to revamp its systems to improve liquidity. Last month, fellow ‘big three’ platform RateSetter unveiled three new investment products, whereby liquidity will be based on RateSetter’s entire loan portfolio, rather than the liquidity of one particular market.

First seen on P2P Finance News

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