Open banking was initially focused primarily on individual consumers. Now, as the still-young sector begins to mature, some operators are moving towards the small-business market.
As lending platforms, we are doing our best to cater for the gaps left by mainstream banks – but there is still unmet demand. Our friends at AltFi take up the story as one operator, Bud, moves towards the SME market.
Ed Maslaveckas, the CEO of Open Banking provider Bud, [has] announced a refocusing of the startup’s resources towards SME customers via a new suite of services.
“We started out working exclusively with the largest institutions because that was where most people went to manage their money – but the truth is that a lot of these decisions are taking place elsewhere now,” Maslaveckas told audiences at Wired’s annual Smarter conference.
The new offering comes with a developer portal for smaller businesses to use Bud’s sandbox environment and pricing on a per-user basis, as opposed to larger packages the startup offers to banks.
New Loans Latest
Project Rhapsody is now 76 per cent funded. The loan offer has an A risk rating, and provides a fixed-rate return of 8 per cent over five years.
Fuller detail is excerpted from the borrower’s offering on site below. The whole pitch – vetted according to our credit committee’s best efforts, though we cannot warrant the accuracy of the statements – is available to logged in users.
Historical Performance And IFISA Process Guide
That figure is the result of over £18 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.