One of the many things we’re learning from the current Covid-19 crisis is that, while central government has a very important role to play in this terrible situation, it’s still difficult to get things done. In the case below, the bureaucratic sclerosis comes mainly from the mainstream banks.
The UK’s fintech lending industry can deploy substantial amounts of loans to small businesses to help shore up the economy, according to Rob Straathof, CEO of Liberis, who says the British Business Bank and the Government should urgently enlist their help.
Under plans drawn up by the Chancellor Rishi Sunak, the Government will guarantee up to 80 per cent of billions of pounds of loans made to small businesses via certain lending institutions in a bid to help struggling firms with cheap liquidity backed by the state.
Five of these lenders – including Aldemore Bank – have temporarily withdrawn from the Coronavirus Business Interruption Loan Scheme, Bloomberg reported yesterday. Others including digital bank Tide says the scheme is available through too few lenders and the scheme itself is not fit for purpose during this crisis.
Among those approved for those CBILs, many of the best-known fintech lenders making a notable absence.
New loan offerings will appear on site soon.
Historical Performance And IFISA Process Guide
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.
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.