SME Loan Credit Quality Hit By Pandemic

Here’s a tour of our horizon. Money&Co. CEO, Nicola Horlick, explains the future as she sees it to our friends at P2P Finance News:

The coronavirus crunch has made it harder to find small- and medium-sized enterprise (SME) loans that are “safe options” for peer-to-peer investors, Money&Co founder Nicola Horlick has said.

Horlick, known as the City superwoman, said the economy was already slowing before the pandemic and its priority is currently preserving capital and investing in technology to support staff working from home.

It comes as the P2P business lender revealed in its latest accounts for the 12 months to March 2020 that it posted pre-tax losses of £499,176, down from £547,679 a year before.

“The company’s heritage lies in making loans to SMEs,” Horlick said in a director’s report seen by Peer2Peer Finance News.s

“The company continues to look for opportunities to lend in this area and has supported its current borrowers through the pandemic.

“However, the severe economic downturn that has occurred due to the Covid-19 crisis has made it harder to find safe options for our lenders in this area.

“It should also be remembered that the economy was already slowing before the pandemic due to the uncertainty created by Brexit and that there is still a possibility that the transition period ends with no EU trade deal, which would result in a further economic shock.”

She said the company is hoping to be profitable next year.

“The company’s first priority is to protect the interests of its lenders and preserve their capital,” she added.

“The company continues to invest in technology and it has been pleasing that the team has been able to wors from home during the pandemic with ease.

“The company expects that turnover will rise very significantly during the coming year and the board will continue to invest in technology.

“It believes that this should take priority over short-term profitability, but it is hoped that the company will be profitable in the year to 31 March 2021.”

The platform is still focusing on music and litigation loans, which Horlick said are proving popular and are expected to grow.

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 £21 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 only had 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.


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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.