Money&Co. chief Nicola Horlick has warned of a tough year for the peer-to-peer lending sector, as the Bank of England predicts the deepest recession on record due to the pandemic. Our friends at P2P Finance News carry the story:
City superwoman Horlick told Peer2Peer Finance News that she was pessimistic about the year ahead for the P2P industry because the Covid-19 induced economic downturn has had a huge impact on small- and medium-sized enterprises (SMEs).
“SMEs been hit particularly hard and P2P does a lot of SME lending, so I’m not optimistic for the rest of the year, unless platforms take a lot of security,” said Horlick.
“Furthermore, a lot of business is going to banks through various government loan schemes such as the coronavirus business interruption loan scheme and the Bounce Back Loan scheme, rather than going to P2P platforms, so I’d expect a bit of a dip in platform lending.
“Banks will increase their share in the SME sector because the government is making them do it.
“Banks may well not be doing enough but a lot of the £50,000 Bounce Back loans are out of the door already.”
Horlick’s comments come as the Bank of England has forecast that the economy will shrink by 14 per cent this year, while unemployment is predicted to rise to nine per cent.
Bank of England Governor has urged banks to keep lending, saying: “By supporting households and business, banks will help to avoid a worse outcome for the economy as a whole, which would in turn generate greater credit losses and weaken their capital positions.”
The Bank’s monetary policy committee voted to keep the base rate at a record low of 0.1 per cent.”
Historical Performance And IFISA Process Guide
That figure is the result of over £23 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.