Bounce-Back Scheme Offers (Relatively) Good News – Plus Loans Latest
Act first, reflect later. That seems to have been the motto of the UK government during the pandemic. It’s a strategy that’s worked very well for vaccinations, but the attempts to throw money at the financial services sector appear to be just that, and little more.
Fraudulent use of the Bounce Back Loan Scheme may be lower than previously thought, according to data analysis conducted by Equifax.
The Bounce Back Loan Scheme (BBLS), which launched in the wake of the pandemic in April 2020, has lent out more than £46.5bn of government-backed cash to pandemic hit businesses before starting to be wound down last month.
Early expectations were that much of this would eventually be written off through default and/fraud. Figures quoted in October last year put the figure of potential losses, including defaults at up to £26bn.
However, according to Experian’s data analysis, companies that apply for multiple government-backed loans to exceed the £50,000 lending caps, could be far lower than anticipated.
It said 0.3 per cent of companies making use of the scheme have taken out total loans in excess of the £50k cap, with only 0.4 per cent in total securing facilities with multiple providers.
In addition, just 12 per cent of businesses with a Bounce Back Loan are consistently spending more money than they are generating each month. The majority do however continue to dip in and out of month to month balance sheet health.
Only 2 per cent of businesses were consistently in positive financial territory across an entire six-month period and just 24 per cent have positive net cash flows in four or more months.
Loan Offers Latest
- The loan offer from Mar-Key Group has an A+ rating and an annual rate of interest of 7 per cent. The term of the loan is 24 months. The offer is currently 74 per cent filled.
- The loan from We Buy Any Home has an A+ rating and an annual rate of interest of 7 per cent. The term of the loan is 36 months. The offer is currently 16 per cent filled.
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 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.