Government Emergency Funding Juggernaut Rolls On

The government-backed emergency finance juggernaut rolls on. The intentions are good, but is the money reaching its target? Time will tell. Our friends at AltFi report the latest:

The UK’s financial institutions have lent out over £34.9bn to SMEs under the government-backed coronavirus loan schemes.

The rate of lending has slowed for the second week in a row, with just under £3.6bn more being lent out than last week, compared to £4bn the week before.

Bounce Back Loans (BBLS) are still the most popular scheme, with over £23.7bn dished out by UK lenders, a jump of nearly £2.5bn from the week before.

Coronavirus Business Interruption Loans (CBILS) are trailing behind with just over £9.5bn lent out, a small increase of only £640m in the week beginning 1 June 2020.

The offering for larger businesses, the Coronavirus Large Business Interruption Loan Scheme (CLBILS) is still by far the least popular government-backed loan scheme, with only £1.57bn being given out in total.

Bounce Back Loan acceptance rate remains the highest of the loans on offer, sitting at just over 81 per cent.

CBILS has a 51 per cent acceptance rate, followed by CLBILS which has just under a 40 per cent acceptance rate, a marked increase from the previous week’s figure of just under 33 per cent.

As well as lending slowing, the number of applications pouring in has also dropped slightly.

Historical Performance And IFISA Process Guide

  • Money&Co. lenders have achieved an average return of more than 8 per cent gross (before we deduct our one per cent fee). 

That figure is the result of over £21 million of loans facilitated on the site, as we bring individuals looking for a good return on capital together with carefully vetted small companies seeking funds for growth. Bear in mind that lenders’ capital is at risk. Read warnings on site before committing capital.

  • Money&Co. has been lending for over 5 years and has only had two bad debts so far, representing a bad debt rate of 0.03 per cent per annum.

All loans on site are eligible to be held in a Money&Co. Innovative Finance Individual Savings Account (IFISA), up to the annual ISA limit of £20,000. Such loans offer lenders tax-free income. Our offering is an Innovative Finance ISA (IFISA) that can hold the peer-to-peer (P2P) business loans that Money&Co. facilitates. For the purposes of this article, the terms ISA and IFISA are interchangeable.

So here’s our guide to the process:

  • Step 1: Register as a lender. Go to the login page, and go through the process that the law requires us to effect. This means we have to do basic checks on you to comply with money-laundering and other security requirements.
  • Step 2: Put money into your account. This is best done by electronic transfer. We can also process paper cheques drawn in favour of Denmark Square Limited, the parent company of Money&Co.
  • Step 3: Buy loans in the loan market. Once you’ve put cash in your account it will sit there – and it won’t earn interest until you’ve bought a piece of a loan. It’s this final step that requires lenders and IFISA investors to be pro-active. Just choose some loans – all loans on the Money&Co. site can be held in an IFISA – and your money will start earning tax-free interest.

The ISA allowance for 2019/20 is unchanged from last tax year at £20,000, allowing a married couple to put £40,000 into a tax-free environment. Over three years, an investment of this scale in two Money&Co. Innovative Finance ISAs would generate £8,400 of income completely free of tax. We’re assuming a 7 per cent return, net of charges and free of tax here.

Once you have made your initial commitment, you might then consider diversifying – buying a spread of loans. To do this, you can go into the “loans for sale” market. All loans bought in this market also qualify for IFISA tax benefits.

Risk: Security, Access, Yield

Do consider not just the return, but the security and the ease of access to your investment. We write regularly about these three key factors. Here’s one of several earlier articles on security, access and yield.


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Disclaimer: Money&Co.™ is the trading name of Denmark Square Limited, Company Number 08561817, registered in England & Wales, authorised and regulated by the Financial Conduct Authority (FCA). The company is identified on the Financial Services Register under Reference Number 727325. The registered office is 58 Glentham Road, Barnes, London, SW13 9JJ where the register of Directors may be inspected. Denmark Square Limited (ISA manager reference number Z1932) manages the Money&Co. Innovative Finance ISA.