People lend small amounts to multiple creditworthy businesses to spread their risk. In turn, those businesses borrow from a multitude of people through an auction mechanism to get a lower interest rate.
Lenders are able to loan specifically to businesses in their community or businesses that meet certain criteria, such as being environmentally friendly.
Small businesses will initially be able to apply for unsecured loans of £5-50k. The businesses are checked for fraud and must meet a number of minimum credit requirements verified by the UK's leading credit agency. Experienced underwriters then further analyse and screen businesses before allowing them onto the Funding Circle platform.