Below is some detail of the offering, which is risk-rated A by our credit committee.
Borrowing requirement: £100,000
Loan term: 12 months
Purpose: Funding disbursements for cavity wall insulation (CWI) claims Security: Corporate guarantee, charge over specific claims funded by Money&Co. plus assignment of ATE policies for each claim funded by Money&Co.
Background: The firm has recently been acquired by the Corporate Guarantor in this transaction as the concluding part of a vertical integration strategy targeting bulk civil litigation claims.
There are four variables in the claims process which are:- – procurement of claims; – funding for disbursements; – ATE insurance wrapper; – Execution (litigation). The guarantor has been active in CWI claims for two and a half years, deploying more than £70m across a portfolio of funded claims. To date these claims have all been directed to third-party law firms for execution. The guarantor firm was established in 2018 to secure the two capital elements – funding and insurance.
Funding continues to be an ongoing process to create the necessary capacity. The insurance solution has led to the defining of a bespoke policy that has taken eighteen months to construct and which provides unique characteristics of insured cover for the protection of Money&Co.’s lenders as well as giving the scheme the market capacity envisaged.
Procurement of claims was already established and remains a readily scalable source of cases through a strategic partnership with a Claims Management Company (CMC) with common ownership and directors with the guarantor firm. The CMC has some twenty years’ experience in procurement and management of bulk civil litigation schemes.
The full detail of the credit note is available to registered lenders (see below for login).
The offer has a gross yield of eight per cent, for a fixed term of 12 months. The loan offer closes when filled, and is currently 89 per cent subscribed.
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.