UK Tech reports on alternative fund sourcing for SMEs. The article focuses on venture capitalists, who are “alive and well”. We couldn’t agree more. But VCs, as the piece points out, are looking to treble their money within three to five years.
Money&Co., on the other hand, brings individuals looking for a good return on capital with SMEs seeking funds to grow. Our lenders have averaged more than 8 per cent return over almost five years and nearly £15 million facilitated. The borrowing SMEs are under pressure to maintain payments, not provide a massive equity return. Below is an excerpt from the UK Tech piece.
Raising the right type of capital to help finance new ventures is fundamental to making a business project successful. According to recent research by accountancy advisory firm and tech sector specialists, Kingston Smith, there has never been a better time to be looking for funding.
It summarises the key elements to consider:
7% Target IFISA Return – Plus Loan Latest
The Innovative Finance ISA (IFISA) is the newest type of ISA, which allows investors to access investments such as peer-to-peer (P2P) loans, with the tax benefits of an ISA wrapper. As with Cash ISAs and Stocks and Shares ISAs, no income tax is payable on the yield from your investment.
A Process Guide To Innovative Finance ISA Investment
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 almost £15 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 2018/19 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.