How are you doing? Nowadays, this question isn’t just a conversational gambit, but a genuine enquiry about health and well-being. Early indications point to a difficult future for SMEs in the post-Covid UK. There’s plenty of good intention from the government – but, of course, some might see good intentions as the paving stones on the road to hell.
Start-ups hit by the lockdown have been given fresh hope for survival as applications for the Government’s coronavirus Future Fund opened [this week].
The new scheme, which has been developed alongside the British Business Bank, will issue convertible loans between £125,000 to £5million to innovative companies which are facing financing difficulties due to the coronavirus outbreak.
Loans will be given subject to at least equal funding from private investors and an initial commitment of £250million by the Government has been announced meaning at least £500million is already up for grabs.
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.