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.
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.