When Is A Pivot Not A Pivot? When It’s A Smack In The Face!

  • There are pivots, and then there are abrupt smacks in the face. A pivot is a swift change of business model; such changes, frequently executed without shareholder consultation, can cause disquiet amongst investors.

The pivot highlighted today has stirred up business counterparties – in this case, the borrowers on direct lending platform (or rather, former lending platform) Growth Street.

A Growth Street borrower action group has been assembled to help businesses who have been asked to repay loans in full after the firm exited the peer-to-peer lending space.

Earlier this month, business lender Growth Street announced that it was closing its platform to retail investors, in favour of institutional funding. It has recalled its loanbook, asking borrowers to either pay their loans in full or seek refinancing.

Business finance specialist Rangewell, who founded the action group, analysed Growth Street’s debentures. It learned that more than half (51 per cent) of borrowers being asked to repay Growth Street loans do not have a relationship with another lender.

This has led to concerns that many borrowers may be unable to refinance their loans in an affordable manner, particularly in the current economic climate.

Rangewell’s analysis found that the average Growth Street borrower is using 80 per cent of their agreed facility, and has approximately £148,122 of current borrowing.

The worst affected areas are in the North East of England and Yorkshire, where 80 per cent of borrowers are without a back-up facility.

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 £21 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 two bad debts 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.