With today’s entirely unsurprising news that a Brexit deal is “essentially impossible” – we were never stupid enough to believe that no deal was a million-to-one shot – we look at preparations on either side of the Irish border.
Our own position is clear: we’ll continue to lend to carefully vetted companies with a good profit record, no debt other than the security charge we take on their assets, and a clear path to repaying the interest and redeeming capital at the end of the loan. We’ll match these companies with individual lenders looking for a good return on their capital.
In Ireland, a new line of “Brexit finance” has just been launched. It’s sad that such credit lines should be needed. Our friends at AltFi report:
Linked Finance, Ireland’s largest peer-to-peer lending platform, has launched a new loan category for Irish SMEs who are in the process of preparing for Brexit.
Niall Dorrian, CEO of Linked Finance, says many of the businesses the firm lends to are putting additional working capital in place and this new loan will help better manage cash through the Brexit process’ uncertainty.
“The logic being that it’s easier to access credit today before any Brexit-related challenges have taken their toll on cash flow. With the UK political situation changing day by day Irish businesses will continue to hope for the best, but would be prudent to prepare for the worst,” he said.
The new 18-month loan offering allows Irish SMEs to access working capital facilities of up to €300,000. Linked Finance says funding can be accessed within 24 hours. These new loans allow Irish SMEs to spread large annually recurring costs over a longer repayment period than the typical 11 or 12-month facilities usually on offer for things like insurance premiums, stocking loans or professional subscriptions.
New Loans Latest
Historical Performance 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.