UK, Europe Take Government Aid Path Toward Covid Crisis Exit
We are not alone. Although whether the UK and our European friends are heading in the right direction is another matter. We’ve all been taking advantage of government support to get the SME sector through this horrible Covid-19 crisis. Little seems certain, other than that governmental aid has been a good idea – even if it has been subject to widespread abuse and fraud (the details of which are only just beginning to come out).
Alternative lenders across the UK and Europe used government-backed job retention schemes, according to data from AltFi’s Alternative Lending State of the Market Report 2020.
Over half (52 per cent) of lenders surveyed made use of the job-saving programmes amidst the coronavirus pandemic, while the remaining 48 per cent did not.
The data, which consists of survey results from the top 44 alternative lenders across the UK and Europe, also showed that of the lenders that used job retention schemes, the vast majority (70 per cent) operated solely in the UK.
Outside of the UK’s furlough scheme, other governments across the continent set up comparable programmes such as Kurzarbeit programme in Germany.
Across the board, only just over a third of lenders (34 per cent) have had to make redundancies because of the Covid-19 pandemic or otherwise, while the remaining 66 per cent have managed to keep all staff on board.
Of the two thirds who retained all staff throughout the pandemic, the majority (52 per cent) did not participate in government job retention schemes, while the remaining 48 per cent did.
And, of the remaining lenders that reduced their headcounts over the last six months, 60 per cent used a government job retention scheme, while 40 per cent did not.
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 £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.
- 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 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.