We’re still wondering quite what’ been happening under cover of Covid-19 and its mutations. Our friends at P2P Finance News report on the latest survey from the British Business Bank:
UK businesses received more than £18bn in private debt lending during 2018 and 2019, highlighting the significant role that the private debt market can play in helping businesses recover from the Covid-19 downturn, the British Business Bank has said.
The UK Private Debt Research Report was published with support from the British Private Equity and Venture Capital Association (BVCA), with a particular focus on how private debt financing can address regional imbalances.
It found that in 2018 and 2019, 82 per cent of all private debt funding deals and 65 per cent (£5.9bn) of private debt investment value was into companies outside of London, with strong regional clusters of private debt activity spotted in the North West and Yorkshire and The Humber.
According to the report – which was released this morning (11 February), over £1bn of growth finance was delivered to UK businesses through 563 deals in 2018 and 2019. The use of growth deals at the smaller end of the market indicates that demand for private debt is unlikely to decrease, and may prove to be a particularly suitable for companies coming out of the Covid-19 downturn with a growing need for investment, the report concluded.
“In a relatively short period of time, private debt has established a position as a viable type of funding for the UK’s smaller businesses at different stages of development,” said Catherine Lewis La Torre, chief executive officer of the British Business Bank.”
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.