The early news of virus fallout from the alternative finance sector is coming in. Below we run an excerpt of news from the European Crowdfunding Network (ECN) as reported by our friends at Crowdfundinsider.
The ECN , the group that represents online capital formation platforms across Europe as well as the UK, has recently completed a survey of member platforms and several non-member platforms seeking to gain insight as to the impact of the COVID-19 pandemic. The survey was completed at the beginning of April so the results are timely. The ECN represents both debt (crowdlending) and equity platforms as well as several donations/rewards platforms.
According to the ECN polling, there has been a “high negative impact” from investors participating on the platforms. Some platforms have taken measures to encourage active investments and others are preparing incentives.
To quote the survey:
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.