Alternative Lending Review, Part II - Plus Loan Latest


Call it platform lending, marketplace lending or peer-to-peer (P2P) lending, the loans facilitated in our sector are a new asset class. The novelty of platform lending has contributed to a classic case of the syndrome known as fear of the unknown.There have been some high-profile failures in the sector. The lesson we've learned from from this is the need to vet platforms carefully. Are they conservative in their risk analysis of the companies seeking to borrow? Does the platform take a charge on the borrowers' assets to safeguard lenders' interests? What is each platform's platform's default rate for failed loans? We've written about this extensively.The advent of the Innovative Finance Individual Savings Account (IFISA) which can contain platform lending has been a modest boost for the asset class. Our best intelligence is that that running total of IFISAs is under £5 billion. This is a relatively small proportion of the Individual Savings Account market (see below).Time will prove the quality and value of carefully managed lending platforms and their products. History may have lessons for the market here: Thirty years ago private equity was scarcely acknowledged as an asset class until the actuarial profession began to recognise that well-managed private equity was a good asset class for pension funds. We're confident that history is on our side...

ISA Facts

  • 10.8 million adults subscribed for ISAs in 2017/18 against 11.1 million in 2016/17 and 12.7 million in 2015/16. The number of Cash ISAs sold declined by 697,000, but 246,000 more Stocks & Shares ISAs were sold. Despite the decline in the number of Cash ISAs sold during 2017/18, 72 per cent of subscriptions were made to Cash ISAs. This figure was 77 per cent in 2016/17.
  • A total of £69 billion was subscribed to ISA accounts in 2017/18, a rise of £7 billion on the previous year.
  • The average UK subscription to an ISA was £6,409, an increase of 15 per cent
  • As at 5 April 2018, the value of all adult ISAs was £608 billion, a rise of 4 per cent on 2016/17. Cash ISAs represented 44 per cent of the total, a fall of 2 per cent on the previous year.
  • 22.1 million adults in the UK have an ISA. Lower income groups showed a preference for Cash ISAs.
  • 22 per cent of all subscribers invested the maximum in 2017/18 (£20,000). 62 per cent of those with an income over £150,000 invested the maximum.

New Loans Latest

Project Rhapsody is now 74 per cent funded. The loan offer has an A risk rating, and provides a fixed-rate return of 8 per cent over five years.
  • Log in or register for full detail. As ever, we've done due diligence but cannot categorically warrant that the representations are true. Read risk warnings on site. Our current annual bad debt rate is 0.03 per cent over more than five years (see also risk explanations and associated articles below).
  • The second tranche offered by Yes You Can is a B-rated offering, over a five-year term, with a fixed rate yield of 11 per cent gross. It is presently nine per cent funded.
Fuller detail is excerpted from the borrower's offering on site below. The whole pitch – vetted according to our credit committee's best efforts, though we cannot warrant the accuracy of the statements - is available to logged in users.

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 £18 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 one bad debt 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 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.

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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.