The stop-start, hot-cold nature of the alternative finance industry in the time of Covid-19 is a continuing theme. Rather than bust, the latest news report from our friends at UK Tech News offers a snapshot of a booming venture-capital industry, at least in London. With the latest vaccine developments and the impact of Brexit (possibly, incredibly, a no-deal Brexit at that) still to be understood, we’ll hold off on making a clear call on where we’re all headed.
According to the latest report from London & Partners and Dealroom.co, London is cementing itself as a top global hub for impact tech. In fact, the VC investment into London’s purpose-driven tech companies has increased by almost 800% (7.8 times) since 2015, compared to 3.1 times in Europe as a whole.
Deputy Mayor for Business, Rajesh Agrawal, said: “London is a global hub for tech and innovation – these findings show that our city has quickly become a global leader for start-ups aimed at tackling some of the most pressing challenges we face as a city and as a country. As we recover from the impact of the Covid-19 pandemic we have the opportunity to help build a greener, fairer, and more inclusive city – and clearly, London’s dynamic tech sector has a critical role to play.”
In 2020 alone, the London-based impact tech companies received $1.2B (approx £910M) in VC investment from January to October. So far, London’s impact firms have secured 429 deals between 2015 and 2020, more than any other city globally.
Historical Performance And IFISA Process Guide
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.
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.