Latest Covid-19 CBILS Moves Help Calm Markets – Plus Loan Latest
The ever-changing foment concerning Covid-19 continues. AltFi reports early developments regarding the CBILS extension, which has had a positive-to-neutral effect on the UK equity markets, at least.
Back when the government first announced its financial aid package to help SMEs in March, it was first met with a sense of exasperation as it appeared fintechs and alternative lenders had been ignored.
Fintechs were initially excluded from the loan schemes as only companies that had turned a profit could apply, something even the largest fintechs are yet to do, and alternative lenders didn’t become accredited lenders until a few weeks into the schemes.
Since then, alternative lenders and banks have dished out over $57bn in government-backed Coronavirus Business Interruption Loan Scheme (CBILS), Coronavirus Large Business Interruption Loan Scheme (CLBILS) and Bounce Back Loans and £720m has been given out from the fintech-friendly Future Fund convertible loan scheme.
In his address yesterday, Sunak announced that he is extending the repayment period for Bounce Back Loans from six to ten years and CBILS for up to ten years, dramatically reducing the average monthly repayment to help struggling businesses.
Sunak said: “More than 60,000 small to medium-sized businesses have taken out CBILS. To help them, I will extend the government guarantee on these loans for up to 10 years, making it easier for lenders to give more people more time to repay.”
These measures are part of the new ‘Pay As you Grow’ scheme that will allow SMEs using government loan schemes to make interest-only payments or stop repayments completely for up to six months, without affecting their credit rating.
Loan Latest
- Our latest loan offering, the property-backed offering from WeBuyAnyHome.com, has attracted 31 per cent of the £150,000 it is seeking. The loan is rated A+ by our credit committee, and yields 8 per cent over a three-year term. For more detail, login.
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 £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.
- 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.