Bad News From Big Player Clouds Perception of P2P Market
Funding Circle, the biggest player in the UK P2P sector, has announced more bad news, which has been badly received by the market. Its shares are 73 per cent off from the IPO price at the time of writing.The news has caused some to question the validity of the entire peer-to-peer (P2P) business model. For the record, we think that P2P players with conservatively managed loan portfolios (ie, not allowing loans on site unless they pass stringent credit-analysis tests) will do just fine.We'll be revisiting this topic soon. Meanwhile we reprise some of the coverage below.
Funding Circle saw its share price slide by more than 29% on Tuesday, after it slashed its revenue growth forecast for 2019 in half.The alternative lender said that it expects revenues to grow by 20% in 2019, down from its initial forecast of around 40%.The P2P lender, which operates in the UK, US, Germany and the Netherlands, saw its stock close at 164p a share on Monday, only for it fall to 115p a share as of 17:10 GMT on Tuesday following its latest trading update.
Money&Co. lenders have achieved an average return of more than 8 per cent gross (before we deduct our one per cent fee). New loans are expected to land on site soon.
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.