Chancellor Rishi Sunak’s much-anticipated bounce-back loans scheme is open for applications as of yesterday. The SME Web has detail.
Delivered exclusively by lenders accredited by the British Business Bank, the scheme, announced on April 27, specifically targets small and micro businesses in all sectors, providing loans from £2,000 up to 25 per cent of their turnover with a maximum loan of £50,000.
The scheme enables businesses to obtain a six-year term loan at a government set interest rate of 2.5 per cent a year, with the Government covering the interest in the first year.
It provides lenders with a 100 per cent government-backed guarantee and a simplified application process is expected to free up cash for many businesses within days.
The Government said earlier it was expecting a surge in applications for the new business loan scheme for the smallest companies when it opens on Monday.
Historical Performance And IFISA Process Guide
That figure is the result of over £23 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.