Challenger bank OakNorth has claimed a lot of government cash. As regular readers will be aware, our concerns centre on the execution – getting the capital to the SMEs that need it. For now, we’ll comment no further. AltFi carries the tale:
OakNorth has been allocated a new tranche of cash to lend to cash-strapped firms hit by the coronavirus pandemic from government coffers.
The London-based lender was one of the first fintech firms to receive accreditation from the British Business Bank. It also was a public critic of some the early delivery of the Chancellor Rishi Sunak’s £330bn economic stimulus package to help British businesses survive the coronavirus-related economic turmoil.
These schemes include the Coronavirus Business Interruption Loan Scheme (CBILS), Coronavirus Large Business Interruption Loan Scheme (CLBILS) and, most recently, the Bounce Back Loans (BBL).
The bank has been allocated a further £160m from the British Business Bank. This made up of £100m for CBILS and an initial allocation of £60m for CLBILS.
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.