Today, we bring news of a very strong statement of intent from a new North American player looking to invest in the UK Fintech sector. The timing is bold: many players have been struggling; the early form of peer-to-peer (P2P) lending is disappearing in favour of niche lending to businesses with asset-backing pretty much a prerequisite.
Clearbanc (not to be confused with Clearbank) has today launched in the UK and has hit the ground running, already promising to invest £500m into British start-ups.
Since 2015, Clearbanc has invested over $1 billion into more than 3,300 startups across the US and Canada.
Clearbanc, which was founded by Canadian Dragon’s Den star Michele Romanow and her partner Andrew D’Souza, has already invested £30m into 250 UK companies during its beta testing.
As part of the launch, the investment firm will be introducing an inventory financing programme to the UK, whereby Clearbanc will buy inventory directly from suppliers with the company only paying Clearbanc once their products have been bought by customers.
Startups can sign up for ‘non-dilutive’ share agreements with Clearbanc, that can offer financing from between £10,000 and £10m with fees of between six and 12 per cent.
Michele Romanow, co-founder and president of Clearbanc, said: “2020 has been incredibly hard for founders, but it’s also brought a ton of opportunities for online businesses.”
“Consumer behaviour has completely adapted to this new way of life, and for companies to succeed in this new wave of shutdowns, it’s critical to capitalise on the rise of online traffic. It’s not as easy as building an online store — founders need the funding, data insights, and global network to grow.”
The fintech uses artificial intelligence to make decisions on investments of up to £10m within 48 hours and remove bias from finance decisions, with the firm having invested in eight times more female-founded companies than traditional VC firms.
Historical Performance And IFISA Process Guide
That figure is the result of over £20 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.