We are pleased to announce the arrival of a new loan offer on site. After passing through our credit-analysis process, the loan is risk-rated B, with an 11 per cent gross yield, that is 10 per cent after deduction of Money&Co.’s one per cent fee. It has a five-year term. Although just recently landed on site, the loan is already 35 per cent funded.
You Can is an online appliance rentals provider, which allows low income households access to the same goods as consumers who acquire such goods outright for cash on sites like Currys PC World or ao.com. We do this by leveraging digital marketing, online credit/fraud screening software, CRM and payments technology to enable us to process vast numbers of applications with a small team of advisors, underwriters and service specialists.
The primary purpose of the loan is to buy further revenue generating rental assets to grow the business faster. There is also a plan to bring in more business automation within the credit/fraud screening process and also the credit control process.
The business has received 8,817 rental applications since its launch in December 2018, which represents 6.8m of potential revenue over a 1-3 year rental period. We have signed up over 500 of those customer applications, which cost us around 28 each to acquire. Each deal generates approximately 3.4 times the asset cost, with us retaining title to the asset at the end of each rental period. We can then rent the item out for a further period, albeit at a lower rental price increasing the amount that we can earn over cost.
Mar-Key 6, rated A+, is 36 per cent filled at the time of writing. The yield on offer is 7 percent. Platform lending of the kind we facilitate here at Money&Co. can be a lucrative activity. The average yield achieved by our registered lenders over more than five years of loan facilitation on this platform is more than 8 per cent, before we deduct our one per cent charge. That return has handsomely outperformed retail price inflation, which has averaged around two per cent over this time.
Historical Performance And IFISA Process Guide
That figure is the result of over £19 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.