Nicola Horlick, Money&Co.'s CEO, pictured above at a recent event to explain the P2P business lending model, says of a recent piece in the Guardian that she couldn't have put it better herself: "Peer-to-peer websites, which cut out the banks by putting people with money to lend in touch with those wanting to borrow, have been one of the financial success stories of the past few years as savers have looked to beat paltry interest rates on offer from banks and building societies.
"It is more risky than putting your cash into a traditional savings account because peer-to-peer isn't covered by the official Financial Services Compensation Scheme, though most of the websites have alternative safeguards.
"But many people have been prepared to live with that because of the higher returns – up to 15%.
"And this week the industry received a major boost when George Osborne unveiled a package of measures designed to help it grow. Crucially, the chancellor announced a new bad debt relief which will allow individual investors to offset any losses.
"For the uninitiated, peer-to-peer firms match borrowers (individuals or companies) with individual investors or lenders. Best-known are Zopa and RateSetter, which, between them, account for getting on for half of the market, though they work in slightly different ways.
Lenders who sign up to RateSetter can choose the best interest rate available based on supply and demand. However, most choose the market rate because it is simple and quick; it is currently 2.6% for a month, 3.5% for a year, 3.8% for three years and 5.9% for five.
"Zopa's rates are 4% for up to three years and 5.1% for five years."
Compare that with our rates at Money&Co. We currently have two loan offers with gross indicative yields of 11.1 and 11.15 per cent at the time of writing. Two loans are "for sale" – meaning you can take over from another lender, and get the income stream straight away. Mecmesin is a manufacturing company offering an A-rated loan with a yield of 7.2 per cent, and Quantum Advisers, a financial services company, offers 8.3 per cent.
*** The Guardian piece underscores the importance of the trade association, the P2P Finance Association. We couldn't become members of the association until we'd been trading for six months. We're talking to the P2PFA right now, having just passed the six-month qualifying limit. Meanwhile, we are members of the UK Crowdfunding Association, and are regulated by the Financial Conduct Authority.