FUNDING Circle has lowered the minimum amount that investors can lend to individual businesses from £20 to £10.
The peer-to-peer business lender, which recently floated on the London Stock Exchange, said this would give investors greater diversification to their portfolios.
“Our automatic tool lends no more than 0.5 per cent of your portfolio to any individual business,” Funding Circle said in a blog post on its website.
“This means that if one of the businesses you lend to is unable to repay their loan, only a small amount of your portfolio would be affected. Spreading your risk in this way helps you earn a more stable return.”
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The change means that investors who lend the minimum initial transfer of £1,000 will now lend to at least 100 businesses, which Funding Circle said “provides a strong level of diversification”.
93 per cent of its investors who have diversified like this for at least a year are earning four per cent or more, the firm said.
Existing loan parts will not be affected and investors lending more than £4,000 will see no change as Funding Circle’s lending tool will lend more than £20 to each business.
Funding Circle scrapped its manual lending option in September 2017, meaning that investors can no longer choose individual businesses to lend to. It said at the time of the announcement that auto-investing was more popular on its platform and ensured better diversification.