Large Dark Clouds, Faint Silver Linings For Platform Lender

You hear it often nowadays: these are extraordinary times. Perhaps one of the most surprising aspects of the vast, unfolding financial crisis is the lift given to shares in Funding Circle.

After an IPO that many saw as unusual, not least for the ability of some close to the company to cash in early. Add to that a valuation that some saw as greedy, the subsequent, disastrous performance of the shares surprised few.

However the emergence of a vast governmental safety net for SMEs has had a positive effect on Funding Circle shares. Investors who committed capital at the time of the IPO will still be far from happy, however.

Our friends at AltFi bring more detail. The share price graph is provided by the excellent IFA, Hargreaves Lansdown.

SME lending platform Funding Circle saw a dramatic increase in its share price last week, rising nearly 100 per cent in just three trading sessions.

The company has seen its shares steadily fall since its IPO back in September 2018 and was ejected from the FTSE 250 in 2019 as a result, has now seen its shares double in value.

Shares for the company were originally listed on the London Stock Exchange for nearly £4.40 per share.

On Wednesday last week, the cost of shares for the London-based small business lender reached an all-time low of just £0.25p per share. 

Despite the current market turmoil shares in Funding Circle have seen a rapid increase in just the last five days alone.

Funding Circle shares are now worth nearly £0.51p, over double what they were worth just last week.

The increase in share price could be down to speculation that Funding Circle could benefit from the £330bn economic stimulus package provided by the Government to help keep small businesses afloat during the current market downturn as well as a potential increase in demand for SME loans broadly.

Funding Circle had a rocky 2019 as it saw higher losses and tighter lending rules to combat its share prices nosediving. 

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 £20 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.