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New Loans Set Land: So Let's Re-Examine Basics - Security, Access, Yield
It's no secret that we've been lining up new loan offerings, and that these attractive, property-backed creatures will be landing imminently on site. It's at such times that a moment of quiet reflection and reappraisal is essential. We believe at Money&Co. that the key factors of asset appraisal for any investor's consideration are security, access and yield. We have used these criteria in launching our own P2P loan portfolio (average gross yield of over 8 per cent across £13 million facilitated loans). We believe these criteria should be used to judge any investment – in a fund, or share, contract for difference, or other security.
- Security - The extra security of the FSCS may be very attractive to some. The guarantor of up to £85,000 of deposit is effectively the UK government. Money&Co., while licensed as an independent financial adviser and answerable to the Financial Conduct Authority, does not offer such security. But we do ensure that a debenture, a legal charge, is taken on our borrowing companies' assets to protect our lenders. And our credit-analysis is very rigorous – with no bad debts in over four years.
- Access - Do you need access to your cash in the short term? If so, the fixed-term provisions of the deposit accounts may seem onerous. Money&Co.'s loans can be for as short a term as one year. Most are longer, with a maximum term of five years. But if you want to take your cash back early, you can do so using our recently launched auction market. This means that you can sell your loan at any time to another Money&Co. lender.
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Jury Still Out On Funding Circle IPO
Funding Circle is the oldest and biggest player in the peer-to-peer (P2P) market. It recently announced its intention to float on the UK stock market and raise £300 million by selling shares in the company. Funding Circle has facilitated loans of more than £5 billion to over 50,000 small businesses. The initial public offering (IPO) will raises investment capital. But is it a good investment? The jury is out ahead of th4 full pricing detail, but we have serious concerns about this issue, based on the track record of IPOs in this sector in the UK and the US. The prospectus details growth plans and risk prospects for investors. He actual sale will be managed later on by a consortium on investment banks, who will look to stimulate interest from private and institutional investors (pension funds and the like). growth, what shareholders will get out of it and any risk factors that could lead to failure or underperformance. At this stage, Funding Circle has published a registration document. This outlines the risks that the business faces, as well as the opportunities for growth in the market it operates in. Funding Circle's investment banks include Merrill Lynch, Goldman Sachs and Morgan Stanley, with Numis Securities playing a broking role. If this IPO is priced reasonably, well and good. But the story of Lending Club, the big US P2P player that IPO'd in December 2014, is less than encouraging. Many of the same investment banks were involved in that IPO, and the share price seemed to many commentators – including the author of this blog – to be set too high. Good for the bankers, but not so much the company nor its investors... (our link blow)
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