Once you’ve decided that Funding Circle is the right lender for your small business and you’ve filled out the online loan application, it’s now time to wait for your information to be reviewed by an underwriter.
During this next underwriting phase, the information you supplied in your application is looked at in more detail. Along with reviewing your financial documentation, an underwriter will take the time to learn more about you and your business goals. This will help Funding Circle make a final determination on whether it wants to assume the risk to fund your business.
Soon after you hit the submit button to send your completed online application, you’ll get a call from an account manager. This personal contact will not only help guide you through the process but will serve as an intermediary between you and the underwriter, according to Account Manager Natalie Roberts.
The account manager is charged with the task of getting to know more about your company’s present needs as well as your growth plans for the future. They’ll discuss your loan application with your assigned underwriter, who’s hard at work reviewing your credit report and other financial data.
You will know what is going on with your application every step of the way: “We value transparency,” says Nick Andrews, manager of the borrower team.
To that end, if the underwriter is missing information from you or would like to discuss something about your business in more detail, you might get a direct call from them. “It depends on how the process is going,” says Roberts.
If you do receive a phone call, it will usually last about 15 to 20 minutes, depending on the size and complexity of your business and loan application.
You should be prepared to tell your story and answer the following questions:
While the underwriter is looking for answers, this is also a chance for you to exude passion for your company and discuss what the future holds for your business, says Liz Pollock, U.S. head of communications.
To help Funding Circle make a final decision on whether to finance your small business, the lender uses its proprietary technology and the 5 Cs of credit. Let’s take a look at those 5 Cs:
This relates to any type of assets or property that might secure your loan.
If you default on your loan, Funding Circle can gain control of the collateral in order to cover its losses. At Funding Circle, your loan is secured by both your company and a personal guarantor—usually you and any other owners of your business.
(This means you’re liable to pay off the loan if your business is no longer able to make payments.)
Funding Circle will look closely at the strength of your business first and then your assets.
Funding Circle will examine how much capital you’ve invested in your own business.
A higher investment shows a stronger level of commitment to your company’s success and growth. Keep in mind that flexibility is important to Funding Circle, so your particular situation will be taken into account.
In a nutshell, your capacity is your ability to pay back your loan.
To better determine this, Funding Circle will look at your cash flow to see if it’s positive on a recurring basis. The lender also looks at your sales and business contracts, as well as whether others have reinvested cash back into your company.
Also falling under the “capacity” category is your credit history:
Funding Circle will delve into this to see if you have any delinquencies.
Lastly, the lender is interested in learning more about your cash flow projections.
For example: Is there a big contract coming your way? Are you headed into your busy time of year?
In other words, your future potential is important.
This relates to any situation that may affect your funding.
For example, an underwriter might want more details on how you plan to use the loan proceeds, inherent risks in your industry, and what’s happening in your local market. An underwriter or your account manager could want to discuss this with you.
Your character gives Funding Circle a general view of your trustworthiness and stability.
Although you might’ve provided some related information on your loan application, you could be asked more questions to determine your trustworthiness.
For example, the underwriting team may want more information on how much experience you have in your industry and whether you have historically made payments on time. An underwriter might also take a look at your social media feeds and read any of your company’s reviews on sites like Yelp. Positive customer reviews and comments go a long way.
An underwriter wants to make sure that your business is showing positive financial and cash management trends.
Because Funding Circle is in the game to help fuel your growth, if you’re looking for a loan as a lifeline, this will be a red flag. Funding Circle will see this if your company has taken on a large amount of new debt in the past 9 months with no real reason to explain this.
Another red flag is consistency, or rather, inconsistency.
Underwriters will examine whether your company’s growth story matches the financial statements you provided, as well as your credit history. If there are inconsistencies, this will prompt a closer look at your company.
The underwriting process takes about 3 business days, or 72 hours.
When the underwriting phase is complete, you’ll hear from your account manager, who will share the good news about your loan approval and confirm the final terms. You’ll also receive a confirmation email. If you move forward and accept the deal, your funding will be on its way, says Pollock.
We’ll discuss what to expect in a Funding Circle loan offer in our final story in our three part series. You can also go back and review the online application process in our first story.
Want to know more? Read our in-depth Funding Circle review here.