When it comes to Covid-related business loans – the emergency measures rushed into place in March 2020 and later – there’s been a lot of analysis gifted with the benefit of twenty-twenty hindsight. Amid the rather hostile criticism that predominates, good news is being reported.
Now, new research evaluating the government’s covid emergency loan schemes has found that hundreds of thousands more jobs and businesses could have been axed without the extra funding.
According to the report, the money may have saved between 150,000 and 500,000 businesses from closing and between 500,000 and 2.9m jobs from being lost.
The government guaranteed £78bn of funding under a range of schemes: the Coronavirus Business Interruption Loan Scheme (CBILS), the Coronavirus Large Business Interruption Loan Scheme (CLBILS) and the Bounce Back Loan Scheme (BBLS).
These were designed to support smaller businesses across the UK that were experiencing lost or deferred revenues, leading to disruptions to their cash flow.
The most common uses of the funds were working capital and to provide financial security.
“The Covid-19 emergency loan schemes were designed to address a drastically altered economic landscape for smaller businesses as lockdowns took effect,” British Business Bank CEO Catherine Lewis La Torre said.
“This evaluation is the first indication of just how important those schemes were in saving livelihoods, businesses and hundreds of thousands of jobs, and we are proud to have played a vital role in their delivery.”
The report, commissioned by the British Business Bank, which helped administer the cash, has estimated that without the schemes, an additional 10 to 34 per cent of BBLS borrowers (146,000 to 505,000 businesses) and an additional 7 to 28 per cent of CBILS/CLBILS borrowers (5,000 to 21,000 businesses) could have permanently ceased trading in 2020.
Loan Offer Latest
A loan offer from Harris & Co., a borrower that operates in the litigation claim sector, is available on site. The loan is risk-rated A by our credit committee. It has a gross yield of eight per cent, for a fixed term of 12 months. The loan offer is currently 13 per cent subscribed, and will close when filled.
Historical Performance And IFISA Process Guide
That figure is the result of over £24 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 2020/21 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.