More Money Comes Through For AltFi Sector’s Monzo
More for Monzo may sound like a 1980s sitcom title, but it’s actually a news item that shows yet again the weight of money headed into alternative finance. Finextra reports:
Monzo is raising a further £50 million in equity funding from existing shareholders and one new investor, Silicon Valley firm Octahedron Capital.
The new capital, which is an extension to its previous round, takes the amount raised by the UK-based challenger bank during the pandemic to £175m.
The bank has been striving to raise revenues after the pandemic blew a hole in its previous – and costly – customer acquisition strategy. With a new CEO at the helm, Monzo has moved to cut out interest rate freebies for currency transfers, introduced fee-paying services and released two new premium accounts.
According to the most recent figures doing the rounds, Monzo currently claims some five million customers. The company also has more than 60,000 business users and more than 100,000 customers across its paid-for current accounts, Monzo Plus and Monzo Premium, with revenues up by 30% since the start of the Covid crisis.
The top-up is the second to Monzo’s initial £60 million round from June last year, following a £60 million capital injection in December. The new funds come at the same discounted valuation of £1.24 billion.
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.