CBI’s FinTech Stimulus For UK Business – Plus Loan Auction Latest
We are well past the new-kid-on-the-block era for alternative funding of UK businesses. Peer-to-peer (P2P) finance has evolved into a sector where most of the successful players look for profitable niche lending (in Money&Co.’s case – property-backing, music rights and litigation finance). But the broad-brush picture still sees a need for alternative funding.
Witness the latest initiative from the Confederation of British Industry (CBI), fronted by CBI president Lord Bilimoria. The objective is “to get more businesses using FinTech to fuel growth”.
Unveiling the ‘Winning with Fintech’ campaign on Monday, the crossbench peer will call for business and government backing to promote the UK’s fintech sector as a key opportunity, with a potential £32 billion additional revenues on offer by 2030.
Among the campaign’s aims will be to help non-financial firms get to grips with fintech as a means of embracing innovation, improving efficiency and competitiveness.
The CBI wants to explore how firms can work more effectively with fintech to unlock growth and efficiency opportunities – in areas including opening up new markets, improving payment flows and transitioning to net zero.
- We start the new tax year with three loan auctions on site, from borrowers we have dealt with before.
All these loans can be held, up to £20,000, as Innovative Finance Individual Savings Accounts (IFISAs). IFISAs are explained in more detail below. Here’s the latest from the auction room:
- Mar-Key has a credit rating of A+, a yield of 7 per cent and a term of two years. It is currently 63 per cent filled.
- HTHL Ltd has a credit rating of A+, a yield of 7 per cent and a term of one years. It is currently 26 per cent filled.
- Harris & Co has a credit rating of A, a yield of 8 per cent and a term of one year. It is currently 14 per cent filled.
- You can see detail on each by logging in and downloading the credit note.
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 £24 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 2020/21 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.