The ill wind of Covid is blowing some good in the direction of the high-tech end of the financial services industry. Our friends at Finextra report this in almost exactly these words, as they bring news of a potential IPO at Atom Bank:
The UK’s first app-only bank Atom is to raise £40 million from existing investors ahead of a potential IPO next year.
The fund raising effort comes as the Durham-based bank approaches profitability on the back of robust growth in mortgage and business lending.
Driven by tail-winds from the pandemic, Atom will have grown lending to SMEs on its balance sheet to over £700m by the end of March 2021, a tripling of business loans in the last 12 months.
Simultaneously, Atom is reporting profitable growth in its mortgage portfolio, having already added £362m of mortgages in the second half of its financial year 2020/21. Since its launch, Atom has loaned £2.8bn to UK mortgage customers. The Durham-based lender also confirmed its place in the secondary markets for UK mortgages, issuing a £775m prime mortgage securitisation last year.
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.