Tough Times Ahead For FinTech Platform Lenders

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

  • 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 £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.

  • Money&Co. has been lending for over 5 years and has facilitated over £23 million – with only two bad debts 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.

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.


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Disclaimer: Money&Co.™ is the trading name of Denmark Square Limited, Company Number 08561817, registered in England & Wales, authorised and regulated by the Financial Conduct Authority (FCA). The company is identified on the Financial Services Register under Reference Number 727325. The registered office is 58 Glentham Road, Barnes, London, SW13 9JJ where the register of Directors may be inspected. Denmark Square Limited (ISA manager reference number Z1932) manages the Money&Co. Innovative Finance ISA.