Today, we bring you a story of a dramatic revaluation of a platform lender – one with a very different business model from our own, but a member of the sub-sector none the less. What’s the moral of the tale? We think it’s simply that mainstream finance got its valuations wrong a few years ago, when platform lending was the darling of the financial world. As we said yesterday, the well-managed lenders will survive regulatory crackdowns – and the vagaries of market fashion. AltFi reports:
Zopa has seen its valuation fall by 47 per cent following its latest fundraise to a new money valuation of £188m, according to AltFi.
The news comes just one day after the P2P lending pioneer secured £140m from IAG Capital Partners, owing to Augmentum Fintech, an investment trust offering exposure to a portfolio of private companies aiming to disrupt financial services, releasing its half-yearly report showing the down round.
The trust wrote down £10.3m in the value of Zopa and its share price has fallen has fallen 4.67 per cent as a result today.
Whilst the news was disappointing for Augmentum shareholders, the trust’s managers pointed to strong growth in its other holdings in revenue terms.
Augmentum said: “Our Top 10 holdings (excluding Zopa) have seen revenue growth of over 65 per cent, such that in the period under review we have a further four investments where we are lifting the investment value. However, we do expect some bumps in the road during the development of a portfolio of fast-growing companies and recent developments in Zopa meant that we have reduced the value of this investment.”
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.