SME Funding – Awareness Up, But Successful Referrals Down

The signals on funding for  small and medium-sized enterprises (SMEs) are mixed. Every few weeks research is released that purports to show SMEs are waking up to the funding available outside the traditional banking mainstream. Then along comes data that seems to demonstrate the opposite.

Below is an upbeat report published here just over a month ago:

  • Nearly half of the UK’s small and medium-sized businesses, 49%, are poised to turn away from big traditional banks when it comes to choosing financial services.
  • Instead, awareness of peer-to-peer marketplaces and digital banks are on the rise, with 66% of SMEs being aware of other options available to them.
  • The figures, reported by marketplace lender Growth Street who surveyed 2,000 SMEs, paint a particularly positive picture for alternative lenders, which are now being considered by 35% of small businesses (up from 30% in 2018).

And here is something from AltFi arguing that all is not well in alternative SME funding.

  • In a punchy letter to Philip Hammond today, iwoca CEO and co-founder Christoph Rieche called on the Chancellor to act in order to fix the Bank Referral Scheme which he claims has not had “any meaningful impact”.
  • The Bank Referral Scheme (BRS) was first announced by the government in August 2014 and finally went live in November 2016 as a way of signposting small businesses rejected by banks for loans towards alternative lending platforms.
  • Rieche’s complaint today is that iwoca, which now lends more to small businesses than Santander and HSBC and finances over half of the businesses which come via the BRS, is disappointed with the paltry number of leads coming its way.
  • Just 902 businesses have been referred via the scheme, according to the latest figures which cover up to June 2018.


8% Yield Loan – Latest

The latest loan from property-backed Seascape is proving popular. This A-rated tranche yields 8 per cent gross, at a fixed rate for five years. As is the case with earlier tranches of credit, we have used our best efforts to ensure the truth of the assertions made, but cannot warrant their absolute accuracy. Further detail is available to logged-in members.

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.