Crowded Out? P2P Player Favours Institutions - Plus Loan Latest
We see that a major player in the peer-to-peer industry appears to be moving further away rom individual investors in favour of institutions. We excerpt a news report below.
Our comment on this is twofold. First, we remain committed to keeping the crowd in crowdfunding (see earlier articles). Second, all this is fine, if Funding Circle's loan book is up to scratch. Just saying...
FUNDING Circle has launched a new fund that will enable institutional investors such as pension funds to lend to small- and medium-sized enterprises (SMEs).As part of the launch, Merseyside Pension Fund will invest £30m in the new vehicle, which is called the UK Economic Impact Fund.The fund is a new way for institutional investors to lend to SMEs through an eight-year, closed-ended structure, targeting annual returns of between 5.5 per cent and 6.5 per cent.
Loan Latest And IFISA Process Guide
Money&Co. lenders have achieved an average return of more than 8 per cent gross (before we deduct our one per cent fee). The current offering from Yes You Can yields 11 per cent, has a five-year term, and is currently 57 per cent funded.
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.
Money&Co. has been lending for over 5 years and has only had one bad debt so far, representing a bad debt rate of 0.04 per cent per annum.
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:
Step 1: Register as a lender. Go to the login page, and go through the process that the law requires us to effect. This means we have to do basic checks on you to comply with money-laundering and other security requirements.
Step 2: Put money into your account. This is best done by electronic transfer. We can also process paper cheques drawn in favour of Denmark Square Limited, the parent company of Money&Co.
Step 3: Buy loans in the loan market. Once you've put cash in your account it will sit there - and it won't earn interest until you've bought a piece of a loan. It's this final step that requires lenders and IFISA investors to be pro-active. Just choose some loans - all loans on the Money&Co. site can be held in an IFISA - and your money will start earning tax-free interest.
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.