Platform Lenders Look Towards a More Managed New Year
The new business year has begun with the usual rash of predictions from pundits talking their own book. One of the less partial and more interesting comes from an opinion piece published in AltFi.The prediction of closer union between mainstream asset management and platform lending is well argued, and such a development will serve both parties well. Not all lenders are aware of the do-it-yourself nature of most platform lending.Whilst platforms vet prospective borrowers carefully (or at least they should do), the act of choosing a borrower may be too much for many a lender. Here at Money&Co. we have asset-management permissions within the management group, and can offer a managed service. Few other platforms can do the same. The move towards one-stop, simplified product offerings is one to welcome.
As the market size grows and the processes mature, more institutional capital will be attracted to the opportunity. Direct investment by non-specialists is proven difficult for many reasons such as costs and expertise of due diligence process, tax and legal opinions on the platforms and the loans acquired, statistically relevant minimum size and multi-vintage mix, credit scoring methodology and execution process, back office issues about position checking, daily cashflow monitoring, performance tracking... For all these reasons, investors will seek to support the new asset management industry that provides expertise and size and cost mutualisation.
Expect new loans, and new product categories here at Money&Co. very soon.
Historical Performance 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).
That figure is the result of over £19 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 0.03 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.