A snatch of text from a recent report by our friends at AltFi caught our attention. See italicised extract, below.
Platform lending is, no doubt, one such alternative – providing lenders understand the risks as well as the attractions of providing credit to the small companies that seek funds for growth here at Money&Co. and on other lending platforms.
One of the most important factors in making successful lending decisions is understanding the security for the loan. At Money&Co., we make sure our borrowers have no other debt, and we take a charge on the assets of the borrowing company. In recent years, that charge has often been applied to real estate (webuyanyhomes.com is a good example). Moreover, our loans are typically a fraction of the market value of the property (64 per cent was a typical percentage).
AxiaFunder is a litigation funding platform offering high net worth and sophisticated retail investors access to commercial litigation investments that typically would only be available to large private equity institutions such as Harbour or Therium.
Global data show that (unsurprisingly) economic prosperity correlates very closely with good rule of law, according to data from the most recent World Justice Project (2019). Venezuela, for example, scores at the worst end on both metrics and at the other extreme Scandinavia is close to the top, China being a (potentially temporary) anomaly. Commercial litigation funding, helping to protect property rights, has a significant positive social impact and almost invariably has a tangible net benefit to the claimant in question when they most need financial support.
New Loans Latest
Project Rhapsody is now 75 per cent funded. The loan offer has an A risk rating, and provides a fixed-rate return of 8 per cent over five years.
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
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.
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:
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.