A recurring theme of our news coverage is the transition of alternative finance to the mainstream. P2P Finance News reports on another aspect of the evolution of the sector – the continued use of self-funding by the owners of small- and medium-sized businesses (SMEs). This something that platform lenders such as Money&Co. approve of – it’s skin in the game, after all. But we feel that platform lenders could do more to make SMEs more aware of the availability of their funds.
A quarter (24 per cent) of owners of small- and medium-sized enterprises (SMEs) in financial difficulty over the past year have dipped into their own personal savings to address these issues, a new survey has found.
Alternative finance provider Nucleus Commercial Finance, who commissioned the research, said that nearly four in 10 (39 per cent) SMEs have encountered financial challenges over the past 12 months.
While a quarter of this group dipped into their personal savings, another 27 per cent took no action at all, rather than seeking the funds they needed from elsewhere.
Yes You Can, rated B, for £30,000 with an 11 per cent fixed yield over five years, is now filled. Project Rhapsody rated A+, with an 8 per cent fixed yield for three years is also filled. More loan offerings will land on site soon.
Historical Performance And IFISA Process Guide
That figure is the result of over £20 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.