The journey to an integrated system for European crowdfunding very rules will take eight years, according to an opinion piece in Crowdfundinsider. The UK will not be a part of that journey. Is this a good thing or a bad one? We offer a taster, with more available if your interest or concern is aroused.
The European Union approved new crowdfunding rules, including a €5 million funding cap, that will apply to all member states finally creating a pan-European approach to online capital formation… Currently, the securities crowdfunding market in Europe struggles under bespoke national rules that vary greatly from country to country engendering unneeded friction for issuers seeking to raise capital online. Industry insiders have long advocated on behalf of harmonized rules with this legislative announcement being a significant step in the right direction.
Perhaps the most tenacious voice in championing better rules for this sector of Fintech is the European Crowdfunding Network (ECN). Both publicly and in the background, the ECN’s leadership and members have lobbied policymakers to advance rules that embrace the concept of a single market while fostering a path for smaller firms to more efficiently raise funding. The ECN has long been helmed by Oliver Gajda, as the group’s founding Executive Director. In light of the significant win for the ECN and its members, Crowdfund Insider contacted Gajda for some additional insight into the ECNs perseverance and final success in the legislative process. Our discussion is below.
Historical Performance And IFISA Process Guide
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.
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 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.