The epithet “trailblazer” is often overused. But our colleagues in the alternative finance sector, Starling Bank, richly merit the name. There’s an arguably unresolved issue over governmental Covid-recovery loans (our view of the allegations is clear enough from our coverage – and from the lack of fire following the somewhat dubious smoke). Nevertheless, Starling remains a leader in the altfi sector. One to watch.
Five years after launching publicly, Starling Bank has reached a milestone of three million current accounts.
In the last 18 months, the bank has added one million users, secured more than £300m in funding, won best British bank for the fourth time at the British Bank Awards, developed a bank card for children, and that’s just the start.
It has also reached more than 460,000 small business accounts, with its business current accounts now comprising 8 per cent of the UK SME banking market.
“Starling has proven that technology can transform the banking experience and we’ve attracted millions of customers as a result,” Starling chief banking officer Helen Bierton said.
“Our technology platform was built to scale, so as we continue to launch industry-first products and features, we’re ready to onboard many more customers – and at pace.”
Data from the current account switching service showed the bank gained the most net switches last year of all banks in the UK.
Loan Offer Latest
A loan offer from Harris & Co., a borrower that operates in the litigation claim sector, is available on site. The loan is risk-rated A by our credit committee. It has a gross yield of eight per cent, for a fixed term of 12 months. The loan offer is currently 15 per cent subscribed, and will close when filled.
Historical Performance And IFISA Process Guide
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.
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 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.