There’s been some head-scratching in analytical quarters as to why the long-predicted consolidation in the peer-to-peer (P2P) lending sector hasn’t materialised. The answer from one commentator is a lack of diversity in product offering among some P2P players.
We think that’s a sensible argument. Diversity in product offering – and in the loans on offer on a platform – is always desirable.
Below, we reprise a comment we particularly agree with, excerpted from an article in P2P Finance News.
Matt Hopkins, an audit director at BDO specialising in fintech, said the market landscape has changed in recent times. He predicts the two halves of the marketplace will go in different directions. He does not expect to see much consolidation within consumer-to-business lending platforms – their options will be “to be a niche player with a differentiated product, collaboration with a marketplace provider, or disappearance”.
He noted there is a significant group of small players but they are unlikely to become M&A targets. If they are to survive, they will need a unique model which sets them apart from competitors.
“If small, mono-product P2Ps are expecting advances from other players as part of an exit event strategy, they are likely to be disappointed,” he said. “Since the collapse of mini-bond provider London & Capital Finance, I do not see a strong demand from the retail investment market and this, coupled with increased regulatory attention, is likely to restrict growth outside the existing large players in this market.”
Inheritance Tax Service
Meanwhile, the Money&Co. Inheritance Tax Service, which takes advantage of Business Relief, is proving popular.
At present, estates with a value of more than £325,000 pay 40 per cent tax. This is reduced to 36 per cent if 10 per cent of the estate is given to charity.
If the family home is passed on before death, then the threshold increases to £450,000. If the threshold is not met following the death of a partner or spouse, then the balance is added to the threshold for the surviving partner or spouse. Thus, the maximum threshold is £900,000 (family home passed on and partner or spouse dies with no assets).
Loan Latest And IFISA Process Guide
That figure is the result of over £17 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.