We’re pleased to report that a new tranche of the warmly received loan offering from music publishing company Bsides Music is now available. It’s already 8 per cent subscribed as we write this article.
We’ve opted for a slower rate of growth than many in the platform lending sector (facilitating some £20 million in the last five years) – but our track record on security is consequently exceptional, with an annualised bad debt rate of joust 0.03 per cent, far below the industry average.
Bsides Music is a music publishing company which funds film scores but also owns other music rights. It is growing through acquiring music catalogues and we are looking to help fund its latest acquisition.
The company has the opportunity to acquire a well-diversified catalogue of music rights from a songwriter who specialises in Christian music. The cost of the acquisition is £538,000 (including deal costs) and the company is contributing cash of £138,000 with a loan from Money&Co. of £400,000 making up the balance. The company is providing additional rights as security such that the loan to value against total security provided will be 62%.
Given the strength of the security, we have given the loan a rating of A+. Normally this would mean an annual gross rate of interest of 7% but given the current turmoil caused by the COVID-19 pandemic, the company has agreed to pay 8%. The loan will have a term of 5 years and will be fully amortising with payments being made quarterly. This means that you will receive some of your capital back each quarter and interest for that quarter.
Bsides Music is eligible for inclusion in an Innovative Finance ISA. If you hold this loan in an ISA, you will receive 7% per annum (after deducting our annual fee of 1%) completely tax-free. If you do not yet have an Innovative Finance ISA, you can sign up on the website. The process takes about five minutes and you will need your National Insurance number. The ISA allowance for 2019/20 is £20,000 and you must use it by midnight on 5 April or you will lose it.
Because this is an acquisition and it is due to complete very soon, the auction will close at 5pm on Tuesday 31 March.
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.