Small- and medium-sized enterprise (SME) borrowers have been urged to apply for government-backed emergency loan schemes through the biggest player in the UK’s direct-lending market, Funding Circle, before the schemes end.
The peer-to-peer lending platform, which has received accreditation for both the coronavirus business interruption loan scheme (CBILS) and the bounce back loan scheme (BBLS), has called upon SMEs to act now to secure finance through the schemes before they end.
Applications for CBILS, which delivers 80 per cent government guaranteed loans up to £250,000, is due to end on 30 September, although the British Business Bank has extended the deadline for lenders to consider and process applications received by this date, to 30 November.
Meanwhile, the deadline for applications for the 100 per cent government backed BBLS which provides loans up to £50,000, is scheduled for 4 November.
The government has not yet made any plans to extend either scheme.
Furthermore, applications seem to be slowing down.
Historical Performance And IFISA Process Guide
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.
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.