SME Funding Options: VC Versus P2P – Plus Loan Latest

UK Tech reports on alternative fund sourcing for SMEs. The article focuses on venture capitalists, who are “alive and well”. We couldn’t agree more. But VCs, as the piece points out, are looking to treble their money within three to five years.

Money&Co., on the other hand, brings individuals looking for a good return on capital with SMEs seeking funds to grow. Our lenders have averaged more than 8 per cent return over almost five years and nearly £15 million facilitated. The borrowing SMEs are under pressure to maintain payments, not provide a massive equity return. Below is an excerpt from the UK Tech piece.

Raising the right type of capital to help finance new ventures is fundamental to making a business project successful. According to recent research by accountancy advisory firm and tech sector specialists, Kingston Smith, there has never been a better time to be looking for funding.

It summarises the key elements to consider:

  • Venture capital is alive and well in the UK. Tech businesses do not have to be profitable to be a candidate for investment, although being able to demonstrate run-rate revenues of c. £1m will enhance their chances of success.
  • Debt funders are primarily focused on security. For tech businesses with few assets, that may require owner managers to offer personal guarantees.
  • PE houses are on a mission to achieve 3x their money back within 3-5 years, so their main concerns are opportunities for growth and where the exit is going to come from.

7% Target IFISA Return – Plus Loan Latest

The Innovative Finance ISA (IFISA) is the newest type of ISA, which allows investors to access investments such as peer-to-peer (P2P) loans, with the tax benefits of an ISA wrapper. As with Cash ISAs and Stocks and Shares ISAs, no income tax is payable on the yield from your investment.

  • Loan latest: Our latest Seascape loan is property-backed and has a fixed rate yield of 8 per cent before our charge of one per cent. The term is five years. It’s 23 per cent funded at the time of writing.

A Process Guide To Innovative Finance ISA Investment

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 almost £15 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:

  • 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 2018/19 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.


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Disclaimer: Money&Co.™ is the trading name of Denmark Square Limited, Company Number 08561817, registered in England & Wales, authorised and regulated by the Financial Conduct Authority (FCA). The company is identified on the Financial Services Register under Reference Number 727325. The registered office is 58 Glentham Road, Barnes, London, SW13 9JJ where the register of Directors may be inspected. Denmark Square Limited (ISA manager reference number Z1932) manages the Money&Co. Innovative Finance ISA.