Markets don’t like uncertainty. The polls continue to suggest that the election result is far from certain in the UK and this is affecting the stock market and currency markets. The FTSE 100 index fell 1.63 per cent in March and Sterling has been weak against the dollar, falling 4.4 per cent in the last month, and is off its recent highs against the Euro having fallen 2.8 per cent since mid-March.
The stock market has only risen by 2.62 per cent over the past twelve months, which makes the yield on Money&Co.’s loans look particularly attractive. If you had invested in all of our loans to date, you would have an average gross yield on your portfolio of 8.92 per cent or 7.92 per cent after the lender fee of 1 per cent. This is a pretty good return when compared to the stock market’s performance over the past year, but even better when you consider that inflation is currently zero.
Loan capital does not fluctuate like stock, currency or bond markets
One of the key points though is that the value of your capital when invested in a Money&Co. portfolio of loans does not rise and fall with sentiment like the stock market, currency markets or the bond markets. It should be remembered that your capital is at risk, although not one of the companies that Money&Co. lenders has supported so far has missed a payment. Defaults are inevitable, although we do not believe that the bad debt experience will exceed 1 per cent in any given twelve-month period.
We are still finding that companies need money to grow. The Bank of England published its quarterly ‘Trends in Lending’ report in January 2015, which covered the three months to the end of November 2014. The average monthly net lending flow to UK businesses was negative during the period, with net lending to SMEs falling by £100 million. Interestingly, demand for credit fell amongst small companies, but increased significantly for medium-sized businesses. Money&Co. has more of a focus on the ‘M’ in SME and so this is good news for our lenders.
Get a better return on your cash and help British companies
There are two new auctions on the site currently. The first, Globavista, makes machine-to-machine devices (trackers for large ships for example) and is refinancing some bank debt following a management buyout. The company is looking to raise £500,000 and will repay the loan over 48 months. The credit rating is A, which suggests an interest rate of 8 per cent. The auction is already 16 per cent funded and the running yield is 8.8 per cent with 23 days to go. The second auction is looking to raise £250,000 for a doors and windows company. The company will repay the loan over 48 months. The credit rating is B, which suggests an interest rate of 10 per cent. The running yield is 10.4 per cent and the auction is 16 per cent funded with 25 days to go.
Whatever happens in the election, the flow of companies looking for money to grow will not stop. With the help of our lenders, these companies will be able to accelerate their growth plans and ultimately, this will be beneficial to the economy overall. The fact that you can get a better return on your cash and help British companies is something that many of our lenders find particularly appealing.