UK VCs Chase FinTech Chances – Plus Loan Offer Latest
The UK’s venture capital industry has been very active in investing in the FinTech sector – more so than its US counterpart, according to research (see below). Our friends at Finextra offer a report, but we’d add just a short comment: perhaps the relative strength of VCX interest may be partially accounted for by the fact that FinTech is already much more of a mainstream investment in the US equity capital markets, with major weightings in tech amongst the big market indices.
A sharp increase in UK venture capital (VC) fund performance over the last 12 months has been highlighted by a new British Business Bank report.
According to the research:
- UK VC funds continue to perform well, in comparison to their US counterparts;
- The UK has an increased proportion of top performing VC funds reporting very high returns;
- Fund managers report positive views on the quality of investments available (97%) and current exit conditions (93%), with the majority (59% and 72% respectively) reporting an improvement on these measures over the last year.
The British Business Bank report, ‘UK Venture Capital Financial Returns 2021’, concludes that higher company valuations – along with strong exit activity in 2020 and 2021 – has contributed to a material uplift in VC financial returns. However, a high proportion of fund managers (59%) also reported high levels of competition for deals, which may suggest these high valuations might not be sustained until exit.
-
- The latest £77,600 loan offering, yielding seven per cent and risk-rated A, is now 15 per cent funded.
The lender is seeking to fund claims for financial mis-selling. The term of the loan is 15 months.
Below are some details from the borrower’s pitch – as ever, we’ve done due diligence but cannot warrant or guarantee the truth of the representations. For full detail, register or log in here.
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 £24 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 2020/21 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.