Today, we bring you the latest in the confetti storm of information as to how business is faring in the Covid-19 crisis. The various news stories reinforce our view – taken many months before the advent of the virus – that property-backed and other asset-backed niche lending is the way to go.
One in 10 businesses have admitted they are at risk of insolvency due to the pandemic according to a P2P Finance News report.
“The figure is revealed in the latest business impact of coronavirus survey from the Office for National Statistics, which shows 10 per cent said their enterprise is at “moderate risk of insolvency” and one per cent put the risk at “severe”.
The survey also found that 12 per cent of the workforce remain on furlough leave, with 67 per cent of furloughed employees receiving top-ups to their pay.
Almost a quarter, 23 per cent, said turnover has decreased by up to 20 per cent, rising to 50 per cent among 17 per cent of respondents.
More worryingly for firms and their staff, half said they have paused trading as they don’t have enough cash to last six months, and 11 per said they have none.
Jack Izzard, director of The Great British Bounce Back, a community of small and micro businesses helping promote firms to fight back against the economic impact of Covid-19, said the government has failed to provide support “of any kind to a significant percentage” of its members.”
Historical Performance And IFISA Process Guide
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.
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:
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.